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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2025-11-05 · 187 added, 387 removed, 222 unchanged (72% of the section changed)

8 unchanged sentences

There are a number of risks, uncertainties and other important factors, many of which are beyond the Company’s control, that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Such risks, uncertainties and other important factors, include, among others, the risks, uncertainties and factors set forth under “Part II-Item IA - Risk Factors” of this Quarterly Report on Form 10-Q and under “Part I-Item IA.

Such risks, uncertainties and other important factors, include, among others, the risks, uncertainties and factors set forth under “Part II-Item 1A - Risk Factors” of this Quarterly Report on Form 10-Q and under “Part I-Item 1A.

Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, including the risks and uncertainties related to the following:

1 unchanged sentence

• reduced demand for Company products due to customer product reformulations or new technologies;

• the Company’s inability to successfully develop or introduce new products;

• the Company’s ability to successfully develop or introduce new products;

• the Company's ability to realize the anticipated cost savings and/or operating efficiencies associated with strategic initiatives;

• compliance with environmental, health and safety, product registration and anti-corruption laws;

4 unchanged sentences

• downturns in certain industries and general economic downturns;

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

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

• unfavorable resolution of litigation against the Company;

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• cost overruns, delays and miscalculations in capacity needs with respect to the Company’s expansion or other capital projects;

• interruption of, damage to or compromise of the Company’s IT systems and failure to maintain the integrity of customer, colleague or Company data;

• interruption of, damage to or compromise of the Company’s IT systems and failure to maintain the integrity of customer, colleague or Company data or illegal or fraudulent activities committed against the Company;

• the Company’s ability to retain its executive management and other key personnel;

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The overall business is comprised of three reportable segments:

Surfactants – Surfactants, which accounted for 72 percent of consolidated net sales for the first nine 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.

Surfactants – Surfactants, which accounted for 75 percent of consolidated net sales for the first three months of 2026, 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 25 percent of consolidated net sales for the first nine months of 2025, include polyurethane polyols, polyester resins and phthalic anhydride.

• In February 2026, the Company announced Project Catalyst, a comprehensive operational and efficiency plan.

As part of Project Catalyst, the Board of Directors approved plans to shut down the Company's Fieldsboro, New Jersey site and decommission select assets at its Elwood, Illinois (Millsdale) and Stalybridge, U.K.

facilities during the first half of 2026.

The Company is consolidating impacted operations into its existing network, improving its asset utilization and reducing its fixed cost basis, while maintaining ongoing supply for its customers.

The Company recognized $65.4 million of pre-tax business restructuring expense related to these asset shutdowns during the first quarter of 2026.

This restructuring expense is captured on a separate Business Restructuring line item on the Condensed Consolidated Statements of Income for the three months ended March 31, 2026.

See Note 16, Business Restructuring, of the notes to the Company's consolidated financial statements for more details.

Polymers – Polymers, which accounted for 22 percent of consolidated net sales for the first three months of 2026, 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 2025, 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 2026, 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.

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For the Three Months

Ended September 30,

(In millions)

Deferred Compensation (Administrative expenses)

Realized/Unrealized Gains on Investments (Other, net)

Investment Income (Other, net)

Pretax Income Effect

Income (Expense)

For the Nine Months

Ended September 30,

Ended March 31,

(In millions)

Deferred Compensation (Administrative expenses)

Realized/Unrealized Gains on Investments (Other, net)

Deferred Compensation Expense (Income) (Operating expenses)

Realized/Unrealized Loss on Investments (Other, net)

Investment Income (Other, net)

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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, 2025 and 2024:

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)

Due to Foreign

Operating Income

Operating Income (Loss)

Pretax Income

RESULTS OF OPERATIONS

Three Months Ended September 30, 2025 and 2024

Net income in the third quarter of 2025 was $10.8 million, or $0.47 per diluted share, versus $23.6 million, or $1.03 per diluted share, in the third quarter of 2024.

Adjusted net income was $10.9 million, or $0.48 per diluted share, versus $23.7 million, or $1.03 per diluted share in the third 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 $56.1 million in the third quarter of 2025, up six percent, versus $53.0 million in the third quarter of 2024.

Adjusted EBITDA was $56.2 million, up six percent, versus $53.1 million in the third 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 third quarter of 2025 compared to the third quarter of 2024.

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

Consolidated net sales increased $43.4 million, or eight percent, versus the prior year quarter.

Higher average selling prices favorably impacted the year-over-year change in net sales by $30.8 million.

Three Months Ended March 31, 2026 and 2025

The Company incurred a $41.1 million net loss in the first quarter of 2026, or $1.81 per diluted share loss, versus income of $19.7 million, or $0.86 per diluted share, in the first quarter of 2025.

The current year loss resulted from a $51.2 million after-tax restructuring charge recognized in the first quarter of 2026.

Adjusted net income was $10.3 million, or $0.45 per diluted share, versus $19.3 million, or $0.84 per diluted share in the first quarter of 2025 (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 (loss) and reported earnings (loss) per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).

Earnings before interest, taxes, depreciation and amortization (EBITDA) were a loss of $16.5 million in the first quarter of 2026, versus $58.0 million of income in the first quarter of 2025.

Adjusted EBITDA was $49.6 million, down 14 percent, versus $57.5 million in the first quarter of 2025 (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 2026 compared to the first quarter of 2025.

A detailed discussion of segment operating performance for the first quarter of 2026, compared to the first quarter of 2025, follows the summary.

Consolidated net sales increased $11.2 million, or two percent, year-over-year.

The favorable impact of foreign currency translation and higher average selling prices positively impacted the year-over-year change in net sales by $25.3 million and $1.3 million, respectively.

The favorable foreign currency translation impact reflects a weaker U.S.

dollar against most of the currencies in locations where the Company conducts its business.

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 one percent, which favorably impacted the change in net sales by $4.0 million.

Polymer and Specialty Products sales volume increased eight and 26 percent, respectively, year-over-year.

Surfactant sales volume decreased two percent.

Foreign currency translation favorably impacted the year-over-year change in net sales by $8.6 million, due to a weaker U.S.

dollar against the majority of currencies in locations where the Company conducts its business.

Operating income in the third quarter of 2025 decreased $2.1 million, or nine percent, versus operating income in the third quarter of 2024.

Surfactant and Polymer operating incomes decreased $10.6 million and $1.1 million, respectively, versus the third quarter of 2024.

Specialty Products operating income increased $5.9 million year-over-year.

Corporate expenses, including environmental remediation and deferred compensation expenses, decreased $3.7 million, or 17 percent, year-over-year.

Corporate expenses, excluding environmental remediation and deferred compensation expenses, decreased $3.8 million, or 19 percent, year-over-year.

The decrease in corporate expenses is primarily due to the non-recurrence of prior year charges associated with an external criminal social engineering fraud event.

Foreign currency translation had a $0.5 million favorable impact on operating income year-over-year.

Operating expenses (including deferred compensation) decreased $2.5 million, or five percent year-over-year.

Consolidated sales volume decreased three percent, which negatively impacted the change in net sales by $15.4 million.

Organic net sales (excluding the divestiture of assets in the Philippines) increased four percent year-over-year and organic sales volume was flat year-over-year.

Surfactant and Polymer sales volumes decreased two and six percent, respectively, year-over-year.

Specialty Products sales volume increased 30 percent.

The Company incurred a $49.6 million operating loss in the first quarter of 2026 versus $28.3 million of operating income in the first quarter of 2025.

The first quarter of 2026 results include a $65.4 million pre-tax restructuring charge.

Although the restructuring charges related to the Surfactants segment, all charges associated with the restructuring were excluded from the Surfactant segment results.

Rather, the restructuring charges are reflected on a separate Business Restructuring line in the Condensed Consolidated Statements of Income for the first quarter of 2026.

Surfactant and Specialty Products operating income decreased $10.4 million and $0.8 million, respectively, year-over-year.

Polymer operating income increased $0.8 million versus the first quarter of 2025.

Corporate expenses, including business restructuring, environmental remediation and deferred compensation expenses increased $67.5 million, year-over-year.

Corporate expenses, excluding business restructuring, environmental remediation and deferred compensation expenses increased $0.5 million, or four percent, year-over-year.

Foreign currency translation had a $1.3 million positive impact on operating income year-over-year.

Operating expenses, excluding the business restructuring charges noted above, increased $1.9 million, or four 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 $0.1 million, or one percent, year-over-year.

• Administrative expenses decreased $3.4 million, or 13 percent, year-over-year, primarily due to the non-recurrence of a $3.3 million charge, related to an external criminal social engineering scheme fraud event, in the third quarter of 2024.

• Research, development and technical service (R&D) expenses increased $0.7 million, or five percent.

• Deferred compensation was $0.8 million of expense in the third quarter of 2025 versus $0.6 million of expense in the prior year quarter.

The $0.2 million increase in deferred compensation expense reflects a larger increase in the market value of mutual fund investment assets during the third quarter 2025 versus the third quarter of 2024.

In addition, despite a slightly larger decrease in the market price of the Company's common stock year-over-year, the number of shares of the Company's common stock in the deferred compensation plans was significantly lower year-over-year.

• Selling expenses were flat year-over-year.

• Administrative expenses were flat year-over-year.

• Research, development and technical service (R&D) expenses increased $0.3 million, or two percent.

• Deferred compensation was $0.6 million of expense in the first quarter of 2026 versus $1.0 million of income in the prior year quarter.

The $1.6 million year-over-year increase in deferred compensation expense primarily reflects a $2.62 per share increase in the market price of the Company's common stock during the first quarter of 2026 versus a $9.66 per share decrease in the first quarter of 2025.

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

Net interest expense for the third quarter of 2025 increased $3.2 million versus the third quarter of 2024.

Net interest expense for the first quarter of 2026 increased $0.9 million, or 21 percent, versus the first quarter of 2025.

This increase was primarily attributable to lower U.S.

capitalized interest income recognized in 2026 as the Company's new specialty alkoxylation facility in Pasadena, Texas started up in April 2025.

Other, net was $1.5 million of income in the third quarter of 2025 versus $1.0 million of income in the third quarter of 2024.

The Company recognized $1.0 million of investment gains (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in both the third quarter of 2025 and 2024.

In addition, the Company reported $0.2 million of foreign exchange gains in the third quarter of 2025 versus $0.5 million of foreign exchange losses in the third quarter of 2024.

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

The Company’s effective tax rate was 34.4 percent in the third quarter of 2025 versus a negative 10.7 percent in the third quarter of 2024.

This increase was primarily attributable to an unfavorable provision-to-return adjustment of the Company’s 2024 tax return,

recorded in the third quarter of 2025, and the non-recurrence of a favorable event, related to global intangible low-taxed income (GILTI), in the third quarter of 2024.

tax act (H.R.1) was signed into law on July 4, 2025 (the 2025 U.S.

The Company has evaluated the impact of the 2025 U.S.

Tax Act and the provisions that will have the most relevance to the Company are bonus depreciation, the immediate expensing of domestic research and development costs, the elimination of the ability to elect out of the §280(c) R&D tax credit reduction and the increased limitation on the deduction for interest expense.

Although the Company continues to analyze the impact of these new provisions, it does not currently believe these items will have a material impact on the Company's financial results, financial position, liquidity or cash flows in 2025.

Other, net was $0.1 million of income in the first quarter of 2026 versus $0.5 million of income in the first quarter of 2025.

The Company recognized $0.1 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 2026 compared to $0.4 million of investment losses in the first quarter of 2025.

In addition, the Company reported $0.2 million of foreign exchange gains in the first quarter of 2026 versus $0.6 million of foreign exchange gains in the first quarter of 2025.

The Company's net periodic pension income was less than $0.1 million of income in the first quarter of 2026 versus $0.3 million of income in the first quarter of 2025.

The Company’s effective tax rate was 24.0 percent in the first quarter of 2026 versus 20.1 percent in the first quarter of 2025.

This increase was primarily attributable to the impact of select uncertain tax positions, deferred tax adjustments, and planned cash repatriation whose amounts did not change materially year-over-year.

However, these amounts had a more pronounced impact on the effective tax rate due to the pre-tax loss in the first quarter of 2026 versus pre-tax income in the first quarter of 2025.

Segment Results

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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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Segment Operating Income

Corporate Expenses, Excluding Deferred Compensation Expense

Deferred Compensation Expense

Total Operating Income

Surfactant net sales for the third quarter of 2025 increased $39.6 million versus net sales for the third quarter of 2024.

Corporate Expenses, Excluding Deferred Compensation

Deferred Compensation Expense (Income)

Total Operating Income (Loss)

Surfactant net sales for the first quarter of 2026 increased $23.4 million versus net sales for the first quarter of 2025.

Higher average selling prices favorably impacted the change in net sales by $9.5 million.

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 decreased two percent and had a $7.3 million unfavorable impact on the change in net sales.

Sales volume declined two percent and had a $6.7 million unfavorable impact on the change in net sales.

Organic net sales increased eight percent year-over-year and organic sales volume increased two percent year-over-year.

Foreign currency translation had a $20.6 million favorable impact on the year-over-year change in net sales.

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For the Three Months

Ended September 30,

Ended March 31,

North America

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Total Surfactants Segment

Net sales for North American operations increased $15.5 million, or seven percent, year-over-year.

Net sales for North American operations increased $7.4 million, or three percent, year-over-year.

Higher average selling prices had a $5.6 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 decreased one percent and negatively impacted the change in net sales by $1.8 million.

The lower sales volume was primarily due to lower demand for products sold into the consumer products end markets that was largely offset by higher demand for products sold into the agricultural and oilfield end markets and to our distribution partners.

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

Net sales for European operations increased $8.0 million, or 12 percent, primarily due to higher average selling prices and the favorable impact of foreign currency translation.

These items positively impacted the change in net sales by $7.5 million and $3.9 million, respectively.

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

Sales volume increased one percent and positively impacted the change in net sales by $1.4 million.

The higher sales volume was primarily due to higher demand for products sold into the industrial cleaning, crop productivity and oilfield end markets that was largely offset by lower demand for products sold into the commodity laundry and cleaning end markets.

Foreign currency translation favorably impacted the change in net sales by $0.4 million.

Net sales for European operations increased $12.6 million, or 15 percent, primarily due to the favorable impact of foreign currency translation, a four percent increase in sales volume and higher average selling prices.

These items positively impacted the change in net sales by $8.7 million, $3.4 million and $0.5 million, respectively.

A weaker U.S.

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

Sales volume declined five percent and negatively impacted the change in net sales by $3.4 million.

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

Higher demand for products sold into agricultural end markets partially offset the above.

Net sales for Latin American operations increased $13.8 million, or 16 percent, primarily due to higher average selling prices that positively impacted the change in net sales by $15.1 million.

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

Foreign currency translation positively impacted the change in net sales by $1.7 million.

The higher sales volume was primarily due to the higher demand for products sold into the crop productivity and commodity laundry and cleaning end markets, partially offset by lower demand for products sold to our distribution partners.

The higher average selling prices were primarily due to the pass-through of higher raw material costs.

Net sales for Latin American operations increased $13.8 million, or 17 percent, primarily due to the favorable impact of foreign currency translation and a five percent increase in sales volume.

These items positively impacted the change in net sales by $11.5 million and $4.1 million, respectively.

A weaker U.S.

dollar relative to all currencies within the region led to the favorable foreign currency translation effect.

A four percent decrease in sales volume negatively impacted the change in net sales by $3.0 million.

The lower sales volume was primarily due to lower demand for products sold into the commodity laundry and cleaning end markets that was partially offset by higher demand for products sold into the personal care and industrial cleaning end markets.

Net sales for Asian operations increased $2.3 million, or 16 percent, versus the prior year quarter.

An eight percent increase in sales volume and higher average selling prices favorably impacted the change in net sales by $1.1 million each, year-over-year.

The higher sales volume was primarily due to the increased demand for products sold into the commodity laundry and cleaning end markets.

Foreign currency translation positively impacted the year-over-year change in net sales by $0.1 million.

Surfactant operating income for the third quarter of 2025 decreased $10.6 million, or 40 percent, versus operating income for the third quarter of 2024.

Gross profit decreased $9.5 million, or 19 percent, and operating expenses increased $1.1 million, or five percent.

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

Lower average selling prices negatively impacted the change in net sales by $1.8 million.

Net sales for Asian operations decreased $10.4 million, or 73 percent, versus the prior year quarter.

An 85 percent decrease in sales volume negatively impacted the year-over-year change in net sales by $12.1 million.

The lower sales volume was mainly due to the divestiture of assets in the Philippines during the fourth quarter of 2025 combined with delays in receiving an export permit after site divestment.

Higher average selling prices positively impacted the change in net sales by $1.7 million.

Surfactant operating income for the first quarter of 2026 decreased $10.4 million, or 36 percent, versus operating income for the first quarter of 2025.

Gross profit decreased $10.0 million, or 19 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:

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For the Three Months

Ended September 30,

Ended March 31,

Gross Profit and Operating Income

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Surfactants Segment Operating Income

Gross profit for North American operations decreased $5.9 million, or 23 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 $5.7 million and were primarily attributable to higher expenses associated with the start-up of the Company's new alkoxylation facility in Pasadena, Texas and higher oleochemical raw material costs.

A one percent decrease in sales volume negatively impacted the change in gross profit by $0.2 million.

Gross profit for European operations decreased $1.1 million, or 12 percent, primarily due to lower average unit margins and a five percent decrease in sales volume.

These items negatively impacted the year-over-year change in gross profit by $1.1 million and $0.5 million, respectively.

Foreign currency translation positively impacted the year-over-year change in gross profit by $0.5 million.

Gross profit for Latin American operations decreased $0.9 million, or eight percent.

Lower average unit margins and a four percent decrease in sales volume negatively impacted the year-over-year change in gross profit by $0.6 million and $0.4 million, respectively.

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

Gross profit for Asia operations decreased $1.7 million year-over-year.

Gross profit for North American operations decreased $2.5 million, or nine percent, versus the prior year primarily due to lower average unit margins.

The lower average unit margins negatively impacted the change in gross profit by $2.6 million and were primarily attributable to the severe cold weather impact during the first quarter of 2025 and higher oleochemicals raw material costs.

A one percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.1 million.

Gross profit for European operations increased $0.7 million, or seven percent, primarily due to the favorable impact of foreign currency translation and a four percent increase in sales volume.

These items positively impacted the year-over-year change in gross profit by $1.1 million and $0.4 million, respectively.

Lower average unit margins negatively impacted the year-over-year change in gross profit by $0.8 million and primarily reflect less favorable product mix.

Gross profit for Latin American operations decreased $2.8 million, or 24 percent.

Lower average unit margins negatively impacted the year-over-year change in gross profit by $4.3 million.

An eight percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.3 million.

Operating expenses for the Surfactant segment increased $1.1 million, or five percent, in the third quarter of 2025 versus the third quarter of 2024.

Polymers net sales for the third quarter of 2025 decreased $5.9 million versus net sales for the same period of 2024.

Lower average selling prices negatively impacted the year-over-year change in net sales by $21.3 million.

An eight percent increase in sales volume

and the favorable impact of foreign currency translation positively impacted the change in net sales by $12.5 million and $2.9 million, respectively.

The lower average unit margins largely reflect increased competitive pressures in Mexico.

The favorable impact of foreign currency translation and a five percent increase in sales volume positively impacted the change in gross profit by $0.9 million and $0.6 million, respectively.

Gross profit for Asia operations decreased $5.5 million year-over-year primarily due to a double digit decrease in sales volume resulting from the asset divestiture in the Philippines during the fourth quarter of 2025.

Sales volume was down eight percent excluding the impact of the asset divestiture in the Philippines.

The decline in sales volume negatively impacted the year-over-year change in gross profit by $4.2 million.

Lower average unit margins negatively impacted the change in gross profit by $1.3 million and reflect higher overhead expenses resulting from production timing differences at the Singapore site.

Operating expenses for the Surfactants segment increased $0.4 million, or two percent, in the first quarter of 2026 versus the first quarter of 2025.

Polymers net sales for the first quarter of 2026 decreased $16.1 million, or 11 percent, versus net sales for the same period of 2025.

Lower average selling prices and a six percent decrease in sales volume negatively impacted the change in net sales by $11.1 million and $9.4 million, respectively.

Foreign currency translation positively impacted the year-over-year change in net sales by $4.4 million.

A comparison of net sales by region follows:

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For the Three Months

Ended September 30,

Ended March 31,

North America

1 unchanged sentence

Total Polymers Segment

Net sales for North American operations increased $4.8 million, or six percent, due to a 21 percent increase in sales volume that positively impacted the year-over-year change in net sales by $15.9 million.

Sales volume of polyols used in rigid foam applications increased 11 percent year-over-year.

Sales volume of commodity phthalic anhydride grew more than double digits primarily due to the market exit of a competitor.

Specialty Polyols sales volume declined six percent year-over-year.

Lower average selling prices negatively impacted the year-over-year change in net sales by $11.1 million.

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

Net sales for North American operations decreased $1.0 million, or one percent, year-over-year.

Lower average selling prices negatively impacted the change in net sales by $4.5 million.

The lower average selling prices were mostly due to pass-through of lower raw material costs.

Sales volume increased five percent and positively impacted the year-over-year change in net sales by $3.5 million.

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

Net sales for European operations decreased $13.6 million, or 22 percent, year-over-year.

This decrease was primarily due to lower average selling prices that negatively impacted the year-over-year change in net sales by $10.5 million.

A 19 percent decrease in sales volume and lower average selling prices negatively impacted the year-over-year change in net sales by $11.4 million and $6.1 million, respectively.

The lower sales volume is due to lower construction demand related to the macroeconomic environment and economic uncertainties along with increased competitive activity.

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

A three percent decrease in sales volume negatively impacted the change in net sales by $2.2 million.

Foreign currency translation positively impacted the change in net sales by $2.9 million.

Foreign currency translation favorably impacted the change in net sales by $3.9 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 $0.9 million, or seven percent, primarily due to lower average selling prices that negatively impacted the year-over-year change in net sales by $1.1 million.

A two percent increase in sales volume positively impacted the year-over-year change in net sales by $0.2 million.

Polymer operating income in the third quarter of 2025 decreased $1.1 million, or eight percent, versus operating income in the third quarter of 2024.

Gross profit decreased $0.9 million, or four percent, and operating expenses increased $0.3 million, or four percent, year-over-year.

Net sales for Asia and Other operations decreased $1.5 million, or 12 percent, primarily due lower average selling prices and a three percent decrease in sales volume.

These items negatively impacted the year-over-year change in net sales by $1.6 million and $0.4 million, respectively.

Foreign currency translation positively impacted the year-over-year change in net sales by $0.5 million.

Polymer operating income in the first quarter of 2026 increased $0.8 million, or 10 percent, versus operating income in the first quarter of 2025.

Gross profit increased $0.8 million, or five percent, and operating expenses decreased less than $0.1 million, or one 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,

Ended March 31,

Gross Profit and Operating Income

4 unchanged sentences

Polymers Segment Operating Income

Gross profit for North American operations increased $1.0 million, or nine percent, year-over-year.

The 21 percent increase in sales volume positively impacted the year-over-year change in gross profit by $2.4 million.

Lower average unit margins negatively impacted the change in gross profit by $1.4 million.

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

Gross profit for European operations decreased $1.7 million, or 20 percent, versus the third quarter of 2024.

This decrease was primarily due to lower average unit margins and a three percent decrease in sales volume.

These items negatively impacted the year-over-year change in gross profit by $1.8 million and a $0.3 million, respectively.

Gross profit for North American operations increased $5.0 million year-over-year.

Higher average unit margins favorably impacted the change in gross profit by $4.8 million.

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

A five percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.2 million.

Gross profit for European operations decreased $4.0 million, or 49 percent, versus the first quarter of 2025.

This decrease was primarily due to lower average unit margins and a 19 percent decrease in sales volume.

These items negatively impacted the year-over-year change in gross profit by $2.8 million and $1.5 million, respectively.

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

Gross profit for Asia and Other operations decreased $0.2 million, or eight percent, due to lower average unit margins.

Operating expenses for the Polymer segment increased $0.3 million, or four percent, in the third quarter of 2025 versus the third quarter of 2024.

Specialty Products

Specialty Products net sales for the third quarter of 2025 increased $9.7 million, or 68 percent, versus net sales for the third quarter of 2024.

This increase was primarily due to higher sales volume that was driven by order timing fluctuations within the pharmaceutical business.

Gross profit and operating income increased $6.0 million and $5.9 million, respectively, year-over-year.

Corporate Expenses

Corporate expenses, which include deferred compensation and other operating expenses that are not allocated to the reportable segments, decreased $3.7 million, or 17 percent, year-over-year.

Corporate expenses were $17.7 million in the third quarter of 2025 versus $21.3 million in the third quarter of 2024.

This decrease was primarily due to the non-recurrence of a $3.3 million expense, related to a criminal social engineering fraud scheme, recognized in the third quarter of 2024.

Deferred compensation expense increased $0.3 million year-over-year.

This increase reflects a larger increase in the market value of mutual fund investment assets during the third quarter 2025 versus the third quarter of 2024.

Additionally, the market price of the Company's common stock decreased $6.88 per share in the third quarter of 2025 versus a $6.71 per share decrease in the third quarter of 2024.

Although the Company's common stock decrease was slightly higher in the third quarter of 2025, the number of shares of the Company's common stock in the deferred compensation plans was significantly lower in 2025 versus 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 September 30, 2025 and 2024:

Company Common Stock Price

Nine Months Ended September 30, 2025 and 2024

Net income in the first nine months of 2025 was $41.9 million, or $1.83 per diluted share, versus $47.0 million, or $2.05 per diluted share, in the first nine months of 2024.

Adjusted net income was $42.2 million, or $1.84 per diluted share, versus $47.7 million, or $2.08 per diluted share in the first nine months 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 $164.7 million in the first nine months of 2025, up nine percent, versus $151.0 million in the first nine months of 2024.

Adjusted EBITDA was $165.1 million, up nine percent, versus $151.9 million in the first nine months 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 nine months of 2025 compared to the first nine months of 2024.

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

Consolidated net sales increased $123.6 million, or seven percent, year-over-year.

Higher average selling prices favorably impacted the year-over-year change in net sales by $103.7 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 two percent, which positively impacted the change in net sales by $31.5 million.

Polymer and Specialty Products sales volume increased eight and 14 percent, respectively, year-over-year.

Surfactants sales volume was flat year-over-year.

Foreign currency translation negatively impacted the year-over-year change in net sales by $11.6 million, primarily due to a stronger U.S.

dollar against the Mexican peso and Brazilian real.

Operating income for the first nine months of 2025 increased $5.3 million, or eight percent, versus operating income in the first nine months of 2024.

Polymer and Specialty Products operating income increased $2.1 million and $5.1 million, respectively, year-over-year.

Surfactant operating income decreased $11.4 million year-over-year.

Corporate expenses, including environmental remediation and deferred compensation expenses, decreased $9.6 million, or 16 percent, year-over-year.

Corporate expenses, excluding environmental remediation and deferred compensation expenses, decreased $7.3 million, or 13 percent, year-over-year.

The decrease in corporate expenses is primarily due to the non-recurrence of prior year charges associated with an external criminal social engineering fraud event.

Foreign currency translation had a $1.5 million unfavorable impact on operating income year-over-year.

Operating expenses (including deferred compensation) decreased two percent year-over-year.

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

• Selling expenses increased $3.5 million, or 10 percent, largely due to higher salaries, higher bad debt provision expense and a USEPA penalty, associated with certain of the Company's biocide products sold by a licensed distributor, recognized in the second quarter of 2025.

• Administrative expenses decreased $6.4 million, or nine percent, year-over-year primarily due to the non-recurrence of $6.8 million of expense, related to a criminal social engineering fraud scheme, recognized in the second and third quarters of 2024.

• Research, development and technical service (R&D) expenses increased $1.7 million, or four percent, primarily due to higher salaries.

• Deferred compensation was $1.6 million of expense in the first nine months of 2025 versus $2.7 million of expense in the first nine months of 2024.

The $1.1 million year-over-year decrease in deferred compensation expense primarily reflects a smaller increase in the market value of mutual fund investment assets during the first nine months of 2025 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 2025 increased $7.1 million, or 76 percent, versus the first nine months 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 started up in April 2025.

Other, net was $3.3 million of income in the first nine months of 2025 versus $4.6 million of income in the first nine months of 2024.

The Company recognized $2.4 million of investment gains (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 2025 compared to $4.2 million of investment gains in the first nine months of 2024.

In addition, the Company reported $0.2 million of foreign exchange gains in the first nine months of 2025 versus $0.9 million of foreign exchange losses in the first nine months of 2024.

The Company's net periodic pension income was $0.8 million in the first nine months of 2025 versus $1.2 million of income in the first nine months of 2024.

The Company’s effective tax rate was 23.8 percent in the first nine months of 2025 versus 18.9 percent in the first nine months of 2024.

This increase was primarily attributable to a decrease to the Company’s R&D tax credit and the expected tax impact of certain cash repatriations to the U.S..

tax act (H.R.1) was signed into law on July 4, 2025 (the 2025 U.S.

The Company evaluated the impact of the 2025 U.S.

tax act and the provisions that will have the most relevance to the Company are bonus depreciation, the immediate expensing of domestic research and development costs, the elimination of the ability to elect out of the §280(c) R&D tax credit reduction, and the increased limitation on the deduction for interest expense.

Segment Results

(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 Expense

Deferred Compensation Expense

Total Operating Income

Surfactant net sales for the first nine months of 2025 increased $110.8 million, or 10 percent, versus net sales for the first nine months of 2024.

Higher average selling prices favorably impacted the change in net sales by $129.4 million.

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 was relatively flat year-over-year and negatively impacted the change in net sales by $0.5 million.

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

A 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 increased $51.5 million, or eight percent, year-over-year.

Higher average selling prices had a $41.2 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 two percent and positively impacted the change in net sales by $11.2 million.

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

Lower demand for products sold into the consumer products end markets partially offset the above.

Foreign currency translation negatively impacted the change in net sales by $0.9 million.

Net sales for European operations increased $30.0 million, or 15 percent, primarily due to higher average selling prices, which had a $26.9 million positive impact on the change in net sales The higher average selling prices were primarily due to the pass-through of higher raw material costs and more favorable product mix.

Sales volume decreased one percent and negatively impacted the year-over-year change in net sales by $2.8 million.

Higher demand for products sold into the agricultural and oil field end markets was largely offset by lower demand for the products sold into the commodity laundry and cleaning end markets.

Foreign currency translation favorably impacted the change in net sales by $5.9 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 $25.7 million, or 10 percent, primarily due to higher average selling prices that positively impacted the change in net sales by $56.1 million.

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

Sales volume decreased three percent and negatively impacted the change in net sales by $7.4 million.

The decrease in sales volume was primarily due to lower demand for products sold into the commodity laundry and cleaning end markets that was partially offset by higher demand for products sold into the agricultural, industrial cleaning and personal care end markets.

A stronger U.S.

dollar relative to all currencies within the region led to a $23.0 million unfavorable foreign currency translation effect.

Net sales for Asian operations increased $3.7 million, or nine percent, year-over-year.

Higher average selling prices and a five percent increase in sales volume positively impacted the change in net sales by $1.9 million and $1.8 million, respectively.

The higher sales volume primarily reflects higher demand for products sold to our distribution partners.

Surfactant operating income for the first nine months of 2025 decreased $11.4 million, or 16 percent, versus operating income for the first nine months of 2024.

Gross profit decreased $6.4 million, or five percent, and operating expenses increased $5.0 million, or seven percent.

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 $11.9 million, or 15 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 $13.2 million and were primarily attributable to higher expenses associated with the start-up of the Company's new alkoxylation facility in Pasadena, Texas, higher oleochemical raw material costs and an environmental reserve adjustment related to the Company's Elwood, Illinois site.

A two percent increase in sales volume positively impacted the year-over-year change in gross profit by $1.3 million.

Gross profit for European operations increased $3.0 million, or 13 percent, primarily due to higher average unit margins that had a $2.7 million favorable impact on the year-over-year change in gross profit.

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

Foreign currency translation favorably impacted the year-over-year change in gross profit by $0.6 million.

A one percent decrease in sales volume negatively impacted the year-over-year change in gross profit by $0.3 million.

Gross profit for Latin American operations increased $1.8 million, or six percent, due to higher average unit margins.

The higher average unit margins positively impacted the year-over-year change in gross profit by $5.9 million and primarily reflect a more favorable product mix.

A three percent decrease in sales volume and the unfavorable impact of foreign currency translation negatively impacted the change in gross profit by $1.0 million and $3.1 million, respectively.

A stronger U.S.

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

Gross profit for Asia operations increased $0.8 million year-over-year 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 $0.4 million each.

Operating expenses for the Surfactant segment increased $5.0 million, or seven percent, in the first nine months of 2025 versus the first nine months of 2024.

The increase was largely due to higher salaries, higher bad debt provision expense and a USEPA penalty, associated with certain of the Company's biocide products sold by a licensed distributor, recognized in the second quarter of 2025.

Polymers net sales for the first nine months of 2025 decreased $2.3 million versus net sales for the same period of 2024.

An eight percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $34.2 million and $6.2 million, respectively.

Lower average selling prices negatively impacted the year-over-year change in net sales by $42.7 million.

A 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 increased $16.2 million, or seven percent, primarily due to a 17 percent increase in sales volume that positively impacted the year-over-year change in net sales by $39.1 million.

Sales volume of polyols used in rigid foam applications increased five percent year-over-year.

Sales volume of commodity phthalic anhydride grew more than double digits primarily due to the market exit of a competitor and the non-recurrence of operational issues at the Millsdale site during 2024.

Specialty Polyols sales volume declined seven percent year-over-year.

Lower average selling prices negatively impacted the year-over-year

change in net sales by $22.9 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 $16.6 million, or nine 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 $23.2 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 positively impacted the change in net sales by $6.4 million.

Sales volume increased by less than one percent and favorably impacted the change in net sales by $0.2 million.

Net sales for Asia and Other operations decreased $1.8 million, or five percent, due to a three percent decrease in sales volume, lower average selling prices and the unfavorable impact of the foreign currency translation.

These items negatively impacted the year-over-year change in net sales by $0.9 million, $0.7 million and $0.2 million, respectively.

The lower sales volume reflects lower demand for polyols used in rigid foam applications that was partially offset by a higher demand for specialty polyols resulting from the Company's product diversification efforts.

Polymer operating income in the first nine months of 2025 increased $2.1 million, or six percent, versus operating income in the first nine months of 2024.

Gross profit increased $3.3 million, or six percent and operating expenses increased $1.2 million or six 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

Asia and Other

Polymers Segment Gross Profit

Operating Expenses

Polymers Segment Operating Income

Gross profit for North American operations increased $3.5 million, or 13 percent, year-over-year.

The 17 percent increase in sales volume positively impacted the year-over-year change in gross profit by $4.7 million.

Lower average unit margins negatively impacted the year-over-year change in gross profit by $1.2 million.

Gross profit for European operations decreased $1.5 million, or six percent, versus the first nine months of 2024.

This decrease was primarily due to lower average unit margins that negatively impacted the year-over-year change in gross profit by $2.3 million.

Gross profit for Asia and Other operations decreased $0.3 million, or 12 percent, primarily due to lower average unit margins and a three percent decline in sales volume.

These items negatively impacted the change in gross profit by $0.3 million and $0.1 million, respectively.

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

Gross profit for Asia and Other operations increased $1.3 million, or 24 percent, primarily due to higher average unit margins that positively impacted the change in gross profit by $1.5 million.

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

A three percent decrease in sales volume and the unfavorable impact of foreign currency translation negatively impacted the year-over-year change in gross profit by a $0.1 million each.

Operating expenses for the Polymer segment increased $1.2 million, or six percent, year-over-year.

Operating expenses for the Polymer segment decreased less than $0.1 million, or one percent, in the first quarter of 2026 versus the first quarter of 2025.

Specialty Products

Specialty Products net sales for the first nine months of 2025 increased $15.0 million, or 32 percent, versus net sales for the first nine months of 2024.

The increase was primarily due to higher average selling prices and a 14 percent increase in sales volume.

Gross profit and operating income increased $5.4 million and $5.1 million, respectively, year-over-year.

The increase in gross profit and operating income was primarily due to order timing differences within the pharmaceutical business.

Specialty Products net sales for the first quarter of 2026 increased $4.0 million, or 24 percent, versus net sales for the first quarter of 2025.

The increase was primarily due to higher sales volume.

Gross profit and operating income decreased $0.8 million each year-over-year.

The year-over-year decreases in gross profit and operating income were primarily due to product mix and lower margins within the medium chain triglycerides (MCT) product line due to higher raw material costs.

Corporate Expenses

Corporate expenses, which include deferred compensation and other operating expenses that are not allocated to the reportable segments, decreased $9.6 million, or 16 percent, year-over-year.

Corporate expenses were $49.6 million in the first nine months of 2025 versus $59.2 million in the first nine months of 2024.

This decrease was primarily due to the non-recurrence of a $6.8 million expense, related to a criminal social engineering fraud scheme, recognized in 2024.

In addition, deferred compensation and environmental reserve expenses were down $1.1 million and $1.2 million, respectively, year-over-year.

The $1.1 million decrease in deferred compensation expense primarily reflects a smaller increase in the market value of mutual fund investment assets during the first nine months of 2025 versus the prior year.

The following table presents the period-end Company common stock market prices used in the computation of deferred compensation income/expense for the nine months ended September 30, 2025 and 2024:

Corporate expenses, which include business restructuring, deferred compensation and other operating expenses that are not allocated to the reportable segments, increased $67.5 million year-over-year.

Corporate expenses were $81.7 million in the first quarter of 2026 versus $14.2 million in the first quarter of 2025.

This increase was primarily due to a $65.4 million restructuring charge recognized in the first quarter of 2026 and $1.6 million of higher year-over-year deferred compensation expense.

See Note 16, Business Restructuring, of the notes to the Company's consolidated financial statements for more details regarding the restructuring charge.

The $1.6 million increase in deferred compensation expense was primarily due to a $2.62 per share increase in the market price of the Company's common stock in the first quarter of 2026 versus a $9.66 per share decrease in the first quarter of 2025.

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, 2026 and 2025:

Company Common Stock Price

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 2025, operating activities were a cash source of $87.9 million versus a cash source of $93.8 million for the comparable period in 2024.

For the first nine months of 2025, investing cash outflows totaled $81.0 million versus cash outflows of $80.7 million in the prior year period.

For the three months ended March 31, 2026, operating activities were a cash source of $16.9 million versus a cash source of $6.9 million for the comparable period in 2025.

For the first three months of 2026, investing cash outflows totaled $22.9 million versus cash outflows of $26.4 million in the prior year period.

Financing activities were a cash source of $13.6 million versus a cash source of $22.8 million in the prior year period.

Cash and cash equivalents increased $8.1 million compared to December 31, 2025, inclusive of a $0.5 million favorable foreign exchange rate impact.

On September 30, 2025, the Company's cash and cash equivalents totaled $118.5 million.

money market funds, which were rated AAAm by Standard and Poor’s, and Aaa-mf by Moody’s, totaled $0.1 million and cash in U.S.

On March 31, 2026, the Company's cash and cash equivalents totaled $140.8 million.

Cash in non-U.S.

money market funds, which were rated AAAm by Standard and Poor’s, Aaa-mf by Moody’s and AAAmmf by Fitch, totaled $18.5 million and cash in U.S.

demand deposit accounts totaled $1.5 million.

The Company’s non-U.S.

subsidiaries held $116.6 million of cash and cash equivalents as of September 30, 2025.

subsidiaries held $120.8 million of cash and cash equivalents as of March 31, 2026.

Operating Activities

Net income during the first nine months of 2025 decreased $5.1 million versus the comparable period in 2024.

Working capital was a cash use of $51.0 million during the first nine months of 2025 versus a cash use of $39.2 million in the comparable period in 2024.

Accounts receivable were a cash use of $25.3 million during the first nine months of 2025 compared to a cash use of $21.7 million for the comparable period in 2024.

Inventories were a cash use of $24.8 million in 2025 versus a cash use of $39.0 million in 2024.

Net income during the first three months of 2026 decreased $61.1 million versus the comparable period in 2025.

Working capital was a cash use of $29.5 million during the first three months of 2026 versus a cash use of $40.9 million in the comparable period in 2025.

Accounts receivable were a cash use of $46.2 million during the first three months of 2026 compared to a cash use of $40.3 million for the comparable period in 2025.

Inventories were a cash source of $10.6 million in 2026 versus a cash use of $16.9 million in 2025.

Accounts payable and accrued liabilities were a cash source of $10.2 million in 2026 compared to a cash source of $27.4 million for the same period in 2025.

Working capital requirements were higher in the first nine 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 the Company's efforts to reduce inventory levels, inclusive of safety stock built in advance of a new collective bargaining agreement that was ratified at the Millsdale, Illinois plant site during the third quarter of 2025.

The change in accounts payable and accrued liabilities reflects lower cash outlays in 2024 due to lower incentive-based compensation, tax and other year-end obligations related to lower 2023 earnings.

Working capital requirements were lower in the first three months of 2026 compared to 2025 primarily due to the changes noted above.

The change in accounts receivable working capital primarily reflects higher selling prices due to the pass through of higher raw material costs and an uptick in year-over-year sales volume during the latter part of the first quarter of 2026.

The change in inventories primarily reflects the Company's ongoing efforts to reduce inventory levels.

It is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2026.

Investing Activities

Cash used for investing activities increased $0.3 million year-over-year.

Cash used for capital expenditures was $87.9 million in the first nine months of 2025 versus $86.6 million in the same period of 2024.

Cash used for investing activities decreased $3.5 million year-over-year primarily due to lower capital expenditures in the first three months of 2026 versus the same period of 2025.

For 2026, the Company estimates that total capital expenditures will be in the range of $105.0 million to $115.0 million.

1 unchanged sentence

Cash flow from financing activities was a source of $13.6 million in 2026 versus a source of $22.8 million in 2025.

The year-over-year change was primarily due to the higher level of borrowing against the Company's revolving credit facility during the first nine months of 2024 versus the issuance of $75.0 million of senior unsecured notes in the first nine months of 2025.

The year-over-year change was primarily due to scheduled principal repayments during the first quarter of 2026.

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, 2025 and 2024.

At September 30, 2025, 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, 2026.

At March 31, 2026, 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 $30.1 million, from $625.4 million on December 31, 2024 to $655.5 million on September 30, 2025, primarily due to the issuance of $75.0 million of senior unsecured notes during the second quarter of 2025, partially offset by scheduled debt repayments.

On May 21, 2025, pursuant to a note purchase and private shelf agreement dated as of June 10, 2021, Stepan issued and sold $37.5 million 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 $37.5 million 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.

Net debt (which is defined as total debt minus cash – see the “Reconciliation of Non-GAAP Net Debt” section of this MD&A) was $537.0 million on September 30, 2025 versus $525.7 million at December 31, 2024.

As of September 30, 2025, the ratio of net debt to net debt plus shareholders’ equity was 30.1 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 September 30, 2025, the Company’s debt included $338.3 million of unsecured notes, with maturities ranging from 2025 through 2033, that were issued to insurance companies in private placement transactions pursuant to note purchase agreements, an $85.6 million delayed-draw term loan borrowed pursuant to the Company’s credit agreement, $229.1 million of short-term loans borrowed under the Company’s revolving credit facility and $2.5 million of foreign credit line borrowings.

As of September 30, 2025, the Company had outstanding letters of credit of $13.2 million, inclusive of $4.6 million issued under the Company’s revolving credit facility.

Consolidated balance sheet debt increased $25.0 million, from $626.7 million on December 31, 2025 to $651.7 million on March 31, 2026, 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 $510.9 million on March 31, 2026 versus $494.0 million at December 31, 2025.

As of March 31, 2026, the ratio of net debt to net debt plus shareholders’ equity was 30.0 percent versus 28.0 percent at December 31, 2025 (see the “Reconciliation of Non-GAAP Net Debt” section in this MD&A for further details).

On March 31, 2026, the Company’s debt included $313.3 million of unsecured notes, with maturities ranging from 2026 through 2033, that were issued to insurance companies in private placement transactions pursuant to note purchase agreements (the “Note Purchase Agreements”), a $81.9 million delayed-draw term loan borrowed pursuant to the Company’s credit agreement, $256.5 million of short-term loans borrowed under the Company’s revolving credit facility and no foreign credit line borrowings.

As of March 31, 2026, the Company had outstanding letters of credit of $13.6 million, inclusive of $4.9 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.

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

As of September 30, 2025, the Company had outstanding letters of credit totaling $8.7 million under the CIC Credit Agreement.

As of March 31, 2026, 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 $4.6 million at September 30, 2025.

These outstanding letters of credit totaled $4.9 million at March 31, 2026.

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, 2025, the Company’s foreign subsidiaries had $2.5 million of outstanding debt.

At March 31, 2026, the Company’s foreign subsidiaries had no 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, 2025.

The Company believes it was in compliance with the covenants under its material debt agreements as of March 31, 2026.

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 2025 and 2024, the Company’s expenditures for capital projects related to environmental matters were $7.2 million and $7.0 million, respectively.

During the first three months of 2026 and 2025, the Company’s expenditures for capital projects related to environmental matters were $0.6 million and $2.4 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, waste disposal and managing environmental compliance in ongoing operations at the Company’s manufacturing locations were $32.8 million and $40.0 million for the nine months ended September 30, 2025 and 2024, 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 $11.1 million and $10.0 million for the three months ended March 31, 2026 and 2025, 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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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 $19.4 million to $44.7 million at September 30, 2025 and $20.0 million to $44.5 million at December 31, 2024.

After partial remediation payments at certain sites, the Company has estimated a range of possible environmental and legal losses of $19.8 million to $46.4 million at March 31, 2026 and $19.3 million to $46.0 million at December 31, 2025.

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.

In the second quarter of 2025, the Company accrued an additional $1.8 million for remediation expenses at the Company's Elwood, Illinois (Millsdale) facility due to a change in the scope of planned remediation activities.

The Company's environmental and legal accruals totaled $19.4 million at September 30, 2025 and $20.0 million at December 31, 2024.

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

Cash expenditures related to environmental remediation and certain other legal matters approximated $4.0 million for the nine months ended September 30, 2025, compared to $2.2 million for the same period in 2024.

The Company's environmental and legal accruals totaled $19.8 million at March 31, 2026 and $19.3 million at December 31, 2025.

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 $0.3 million for the three months ended March 31, 2026, compared to $2.6 million for the same period in 2025.

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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These measures should be considered in addition to, not as substitutes for or superior to, measures of financial performance prepared in accordance with GAAP and there are limitations to using non-GAAP financial measures.

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.

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.

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

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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 transactions occurred.

The cumulative tax effect is typically 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, 2025

September 30, 2024

Net Income Attributable to the Company as Reported

Deferred Compensation Income (including

related investment activity)

Environmental Remediation Expense

Cumulative Tax Effect on Above Adjustment Items

Adjusted Net Income

Nine Months Ended

(In millions, except per share amounts)

September 30, 2025

September 30, 2024

Net Income Attributable to the Company as Reported

Deferred Compensation Income (including

March 31, 2026

March 31, 2025

Net Income (Loss)

Net Income (Loss) Attributable to the Company

Deferred Compensation (Income)/Expense (including

related investment activity)

Environmental Remediation Expense

Business Restructuring

Total Pre-tax Adjustments

Cumulative Tax Effect on Above Adjustment Items

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For the Three Months

Ended September 30,

($ in millions)

Operating Income

Depreciation and Amortization

Other, Net Income

Deferred Compensation Income

Environmental Remediation

Adjusted EBITDA

For the Nine Months

Ended September 30,

Ended March 31,

($ in millions)

Operating Income

Operating Income (Loss)

Depreciation and Amortization

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Environmental Remediation

Business Restructuring

Adjusted EBITDA

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(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