What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-06 · 374 added, 171 removed, 238 unchanged (70% of the section changed)

10 unchanged sentences

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:

• the Company's ability to realize the anticipated cost savings or operating efficiencies associated with strategic initiatives, including Project Catalyst;

• accidents, unplanned production shutdowns or disruptions in any of the Company’s manufacturing facilities;

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• 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;

• compliance with laws and other legal restrictions, including those relating to the international scope of our business;

• the Company’s ability to make acquisitions of suitable candidates and successfully integrate acquisitions;

• global competition and the Company’s ability to successfully compete;

• domestic and global competition and the Company’s ability to successfully compete;

• volatility of raw material, natural gas and electricity costs as well as any disruption in their supply;

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• the Company’s ability to keep and protect its intellectual property rights;

• potentially adverse tax consequences due to the international scope of the Company’s operations;

• downgrades to the Company’s credit ratings or disruptions to the Company’s ability to access well-functioning capital markets;

• changes in tax policy and potentially adverse tax consequences due to the international scope of the Company’s operations;

• downgrades to the Company’s credit ratings or disruptions to the Company’s ability to access well-functioning credit or capital markets;

• conflicts, military actions, terrorist attacks and general instability, particularly in certain energy-producing nations, along with increased security regulations;

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The overall business is comprised of three reportable segments:

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.

Surfactants – Surfactants, which accounted for 73 percent of consolidated net sales for the first six 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.

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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.

The Company is mostly 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 $5.1 million and $70.5 million of pre-tax business restructuring expense related to these asset shutdowns during the second quarter and the first six months of 2026, respectively.

This restructuring expense is captured on a separate Business Restructuring line item on the Condensed Consolidated Statements of Income for the three and six months ended June 30, 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.

Polymers – Polymers, which accounted for 24 percent of consolidated net sales for the first six 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 three months of 2026, 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 six 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 March 31,

Ended June 30,

(In millions)

Deferred Compensation Expense (Income) (Operating expenses)

Realized/Unrealized Loss on Investments (Other, net)

Deferred Compensation (Operating expenses)

Realized/Unrealized Gains on Investments (Other, net)

Investment Income (Other, net)

Pretax Income Effect

Income (Expense)

For the Six Months

Ended June 30,

(In millions)

Deferred Compensation (Operating expenses)

Realized/Unrealized Gains on Investments (Other, net)

Investment Income (Other, net)

Pretax Income Effect

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

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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 months ended March 31, 2026 and 2025:

For the Three Months

Ended March 31,

Ended June 30,

(In millions)

Due to Foreign

Operating Income (Loss)

Operating Income

Pretax Income

For the Six Months

Ended June 30,

(In millions)

Due to Foreign

Operating Income (Loss)

Pretax Income (Loss)

RESULTS OF OPERATIONS

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.

Three Months Ended June 30, 2026 and 2025

Net income in the second quarter of 2026 was $22.9 million, or $1.00 per diluted share, versus $11.3 million, or $0.50 per diluted share, in the second quarter of 2025.

Adjusted net income was $27.1 million, or $1.18 per diluted share, versus $12.0 million, or $0.52 per diluted share in the second 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 $69.1 million in the second quarter of 2026, up 37 percent, versus $50.6 million in the second quarter of 2025.

Adjusted EBITDA was $74.4 million, up 45 percent, versus $51.4 million in the second 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 second quarter of 2026 compared to the second quarter of 2025.

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

Consolidated net sales increased $89.4 million, or 15 percent, year-over-year.

Higher average selling prices favorably impacted the year-over-year change in net sales by $54.4 million.

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

Consolidated sales volume increased three percent and positively impacted the change in net sales by $17.9 million.

Surfactant, Polymer and Specialty Products sales volume increased two, five and four percent, respectively, year-over-year.

Organic sales volume (excluding the divestiture of assets in the Philippines and the exit of a product line in the UK) increased six percent year-over-year.

Foreign currency translation positively impacted the year-over-year change in net sales by $17.1 million, primarily due to 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 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.

Operating income in the second quarter of 2026 increased $19.2 million, or 107 percent, versus operating income in the second quarter of 2025.

Surfactant and Polymer operating income increased $21.0 million and $5.3 million, respectively, year-over-year.

Specialty Products operating income decreased $0.3 million versus the second quarter of 2025.

Corporate expenses, including business restructuring, environmental remediation and deferred compensation expenses increased $6.8 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.

Business restructuring expenses were $5.1 million in the second quarter of 2026 versus no restructuring expenses recognized during the second quarter of 2025.

Foreign currency translation had a $2.1 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.

Operating expenses (including deferred compensation) increased $3.7 million, or seven percent, year-over-year.

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

• 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.

• Selling expenses were up one percent year-over-year.

Higher incentive-based compensation expenses were mostly offset by the non-recurrence of a USEPA penalty recognized in 2025.

• Administrative expenses were up $1.4 million, or six percent, primarily due to higher incentive-based compensation expenses.

• Research, development and technical service (R&D) expenses increased $2.5 million, or 17 percent primarily due to higher incentive-based compensation expenses.

• Deferred compensation was $1.4 million of expense in the second quarter of 2026 versus $1.8 million of expense in the prior year quarter.

The $0.4 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 second quarter of 2026 versus the second quarter of 2025.

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

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 $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.

Net interest expense for the second quarter of 2026 increased $0.2 million, or four percent, versus the second quarter of 2025.

Other, net was $1.0 million of income in the second quarter of 2026 versus $1.3 million of income in the second quarter of 2025.

The Company recognized $1.4 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 second quarter of 2026 compared to $1.7 million of investment gains in the second quarter of 2025.

In addition, the Company reported $0.4 million of foreign exchange losses in the second quarter of 2026 versus $0.6 million of foreign exchange losses in the second quarter of 2025.

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

The Company’s effective tax rate was 29.6 percent in the second quarter of 2026 versus 17.7 percent in the second quarter of 2025.

The increase was primarily driven by a decrease in tax credit due to lower qualifying expenses associated with certain start-up costs which did not recur in 2026, and the non-recurrence of interest income recorded in Q2 2025 related to an audit settlement.

Segment Results

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For the Three Months

Ended March 31,

Ended June 30,

Specialty Products

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For the Three Months

Ended March 31,

Ended June 30,

Operating Income

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Segment Operating Income

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 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.

Corporate Expenses, Excluding Deferred Compensation Expense

Deferred Compensation Expense

Total Operating Income

Surfactant net sales for the second quarter of 2026 increased $72.4 million, or 18 percent, versus net sales for the second quarter of 2025.

Higher average selling prices had a $47.3 million favorable impact on the change in net sales.

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

Sales volume increased two percent and had a $9.9 million favorable impact on the change in net sales.

Organic sales volume increased seven percent year-over-year.

The Company believes a portion of the volume growth reflects customer pre-buying in response to geopolitical and product supply uncertainty.

Foreign currency translation had a $15.2 million favorable impact on the year-over-year change in net sales.

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For the Three Months

Ended March 31,

Ended June 30,

North America

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Total Surfactants Segment

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 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.

Net sales for North American operations increased $39.4 million, or 17 percent, year-over-year.

Higher average selling prices positively impacted the change in net sales by $30.9 million and were primarily due to the pass-through of higher raw material costs, more favorable product mix and pricing actions.

Sales volume increased four percent and positively impacted the change in net sales by $8.5 million.

The higher sales volume was primarily due to higher demand for products sold into the industrial cleaning and oilfield end markets.

Net sales for European operations increased $7.4 million, or 10 percent, due to higher average selling prices, the favorable impact of foreign currency translation, and a one percent increase in sales volume.

These items positively impacted the change in net sales by $5.2 million, $1.4 million and $0.8 million, respectively.

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

A weaker U.S.

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

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.

The higher sales volume was primarily due to higher demand for products sold into the consumer products end markets, partially offset by lower demand for products sold into the crop productivity end markets.

Net sales for Latin American operations increased $33.0 million, or 36 percent, primarily due to the favorable impact of foreign currency translation, a 13 percent increase in sales volume, and higher average selling prices.

These items positively impacted the change in net sales by $13.7 million, $11.8 million, and $7.5 million, respectively.

A weaker U.S.

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

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.

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

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

Net sales for Asian operations decreased $7.2 million, or 61 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.

A 76 percent decrease in sales volume negatively impacted the year-over-year change in net sales by $9.1 million.

The lower sales volume was mainly due to the divestiture of assets in the Philippines during the fourth quarter of 2025.

Higher average selling prices positively impacted the change in net sales by $1.8 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.

Foreign currency translation had a $0.1 million favorable impact on the change in net sales year-over-year.

Surfactant operating income for the second quarter of 2026 increased $21.0 million, or 157 percent, versus operating income for the second quarter of 2025.

Gross profit increased $22.8 million, or 56 percent, and operating expenses increased $1.8 million, or seven 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 March 31,

Ended June 30,

Gross Profit and Operating Income

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Surfactants Segment Operating Income

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.

Gross profit for North American operations increased $11.0 million, or 57 percent, versus the prior year primarily due to higher average unit margins.

The higher average unit margins favorably impacted the change in gross profit by $10.3 million and were attributable to more favorable product mix, pricing actions, the initial benefits from Project Catalyst actions and the non-recurrence of an environmental remediation reserve adjustment recognized in the second quarter of 2025.

The four percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.7 million.

Gross profit for European operations increased $1.8 million, or 22 percent, primarily due to higher average unit margins and the favorable impact of foreign currency translation.

These items positively impacted the year-over-year change in gross profit by $1.5 million and $0.2 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.

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.

The one percent increase in sales volume positively impacted the change in gross profit by $0.1 million.

Gross profit for Latin American operations increased $10.1 million, or 92 percent.

Higher average unit margins, the favorable impact of foreign currency translation and the 13 percent increase in sales volume favorably impacted the year-over-year change in gross profit by $6.3 million, $2.4 million and $1.4 million, respectively.

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

Gross profit for Asia operations decreased $0.2 million year-over-year primarily due to the double-digit decrease in sales volume resulting from the asset divestiture in the Philippines during the fourth quarter of 2025.

The decline in sales volume negatively impacted the year-over-year change in gross profit by $1.8 million but was largely offset by higher average unit margins.

The higher average unit margins positively impacted the change in gross profit by $1.6 million and largely reflect lower overhead expenses resulting from production timing differences.

Operating expenses for the Surfactants segment increased $1.8 million, or seven percent, in the second quarter of 2026 versus the second quarter of 2025.

This increase was largely due to higher incentive-based compensation expenses that were partially offset by the non-recurrence of a $1.1 million USEPA penalty recognized in the second quarter of 2025.

In addition, foreign currency translation had a $0.7 million unfavorable impact on the year-over-year change in operating expenses.

Polymer net sales for the second quarter of 2026 increased $15.3 million, or nine percent, versus net sales for the same period of 2025.

A five percent increase in sales volume, higher average selling prices and the favorable impact of foreign currency translation positively impacted the year-over-year change in net sales by $7.4 million, $6.0 million and $1.9 million, respectively.

A comparison of net sales by region follows:

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For the Three Months

Ended March 31,

Ended June 30,

North America

1 unchanged sentence

Total Polymers Segment

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

Net sales for North American operations increased $11.0 million, or 12 percent, year-over-year.

Sales volume increased 15 percent and positively impacted the year-over-year change in net sales by $13.0 million.

Sales volume of polyols used in rigid foam applications and within the commodity phthalic anhydride business increased 19 percent and 12 percent, respectively.

Within rigid applications, spray foam sales increased triple digits.

Lower average selling prices negatively impacted the change in net sales by $2.0 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.

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.

Foreign currency translation favorably impacted the change in net sales by $3.9 million.

Net sales for European operations increased $4.0 million, or six percent, year-over-year.

Higher average selling prices and the favorable impact of foreign currency translation positively impacted the year-over-year change in net sales by $5.0 million and $1.2 million, respectively.

The higher average selling prices were mainly attributable to the pass through of higher raw material costs.

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 $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.

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

The lower sales volume reflects lower construction demand related to the macroeconomic environment and economic uncertainties.

Net sales for Asia and Other operations increased $0.3 million, or two 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 $1.4 million and $0.7 million, respectively.

A 16 percent decrease in sales volume negatively impacted the year-over-year change in net sales by $1.8 million.

Polymer operating income in the second quarter of 2026 increased $5.3 million, or 31 percent, versus operating income in the second quarter of 2025.

Gross profit increased $6.2 million, or 25 percent, and operating expenses increased $0.8 million, or 11 percent, year-over-year.

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

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For the Three Months

Ended March 31,

Ended June 30,

Gross Profit and Operating Income

5 unchanged sentences

Gross profit for North American operations increased $5.5 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.

Higher average unit margins and the 15 percent increase in sales volume positively impacted the change in gross profit by $3.5 million and $2.0 million, respectively.

Gross profit for European operations increased $0.9 million, or 10 percent, versus the second quarter of 2025.

This increase was primarily due to higher average unit margins and the favorable impact of the foreign currency translation.

These two factors positively impacted the change in gross profit by $1.0 million and $0.2 million, respectively.

The three percent decrease in sales volume negatively impacted the year-over-year change in net sales by $0.3 million.

Gross profit for Asia and Other operations decreased $0.2 million, or 10 percent, primarily due to the 16 percent decrease in sales volume.

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

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

Operating expenses for the Polymer segment increased $0.8 million, or 11 percent, in the second quarter of 2026 versus the second quarter of 2025 primarily due to higher incentive-based compensation expenses.

Specialty Products

Specialty Products net sales for the second quarter of 2026 increased $1.7 million, or eight percent, versus net sales for the second quarter of 2025.

Gross profit and operating income decreased $0.2 million and $0.3 million, respectively, year-over-year.

The year-over-year decreases in gross profit and operating income were primarily due to less favorable product mix within the medium chain triglycerides (MCT) product line that was mostly offset by higher earnings in the food and flavor business.

Corporate Expenses

Corporate expenses, which include business restructuring, deferred compensation and other operating expenses that are not allocated to the reportable segments, increased $6.8 million year-over-year.

Corporate expenses were $24.6 million in the second quarter of 2026 versus $17.8 million in the second quarter of 2025.

This increase was primarily due to a $5.1 million restructuring charge recognized in the second quarter of 2026 and higher year-over-year incentive-based compensation expenses.

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

These items were partially offset by a $0.4 million year-over-year decrease in deferred compensation expenses and a $0.6 million decrease in legacy environmental reserve expenses.

The $0.4 million decrease in deferred compensation expense was primarily due to a smaller increase in the market value of mutual fund investment assets during the second quarter of 2026 versus the second quarter of 2025.

Partially offsetting the above, the market price of the Company's common stock increased $5.74 per share in the second quarter of 2026 versus a $0.46 per share decrease in the second 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 June 30, 2026 and 2025:

Company Common Stock Price

Six Months Ended June 30, 2026 and 2025

The Company incurred an $18.5 million net loss in the first half of 2026, or a loss of $0.81 per diluted share, versus net income of $31.1 million, or $1.36 income per diluted share, in the first half of 2025.

The current year loss resulted from $55.2 million of after-tax restructuring charges recognized in 2026.

Adjusted net income was $37.4 million, or $1.63 per diluted share, versus $31.3 million, or $1.37 per diluted share in the first half 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 $52.7 million in the first half of 2026, down 51 percent from $108.6 million in the first half of 2025.

Adjusted EBITDA was $124.1 million, up 14 percent, from $108.9 million in the first half 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 half of 2026 compared to the first half of 2025.

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

Consolidated net sales increased $100.7 million, or eight percent, year-over-year.

Higher average selling prices favorably impacted the year-over-year change in net sales by $56.1 million.

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

Foreign currency translation positively impacted the year-over-year change in net sales by $42.4 million, due to a weaker U.S.

dollar against all currencies in the

locations that the Company conducts its business.

Consolidated sales volume increased less than one percent and positively impacted the change in net sales by $2.2 million.

Organic sales volume was up three percent year-over-year.

The Company incurred a $12.4 million operating loss in the first half of 2026 versus $46.3 million of operating income in the first half of 2025.

Surfactant and Polymer operating income increased $10.6 million and $6.1 million, respectively, year-over-year.

Specialty Products operating income decreased $1.0 million between years.

Corporate expenses, including business restructuring, environmental remediation and deferred compensation expenses increased $74.3 million, year-over-year.

Business restructuring expenses were $70.5 million in the first six months of 2026 versus no restructuring expenses recognized in the first six months of 2025.

Foreign currency translation had a $3.4 million favorable impact on operating income year-over-year.

Operating expenses (including deferred compensation) increased $5.6 million or six percent year-over-year.

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

• Selling expenses increased $0.3 million, or one percent, year-over-year.

• Administrative expenses increased $1.3 million, or three percent, year-over-year primarily due to higher incentive-based compensation expenses.

• Research, development and technical service (R&D) expenses increased $2.8 million, or 10 percent primarily due to higher incentive-based compensation expenses.

• Deferred compensation was $2.0 million of expense in the first half of 2026 versus $0.8 million of expense in the first half of 2025.

The $1.2 million year-over-year increase in deferred compensation expense primarily reflects an $8.36 per share increase in the market price of the Company's common stock during the first six months of 2026 versus a $10.12 per share decrease in the market price during the first six months of 2025.

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

Net interest expense for the first half of 2026 increased $1.1 million, or 11 percent, versus the first half 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 $1.2 million of income in the first half of 2026 versus $1.8 million of income in the first half of 2025.

The Company recognized $1.3 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 first half of 2026 and 2025.

In addition, the Company reported $0.2 million of foreign exchange losses in the first half of 2026 versus less than $0.1 million of foreign exchange losses in the first half of 2025.

The Company's net periodic pension income was less than $0.1 million in the first half of 2026 versus $0.5 million in the first half of 2025.

The Company’s effective tax rate was 15.7 percent in the first half of 2026 versus 19.2 percent in the first half of 2025.

The decrease was primarily attributable to the geographical mix of income partially offset by select uncertain tax positions that did not recur in the first half of 2026.

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

Segment Results

(In thousands)

For the Six Months Ended June 30,

Specialty Products

Total Net Sales

(In thousands)

For the Six Months Ended June 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 half of 2026 increased $95.8 million, or 11 percent, versus net sales for the first half of 2025.

Higher average selling prices favorably impacted the change in net sales by $56.8 million.

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

Sales volume increased less than one percent and positively impacted the year-over-year change in net sales by $3.2 million.

Organic sales volume increased four percent year-over-year.

The Company believes a portion of the volume growth reflects customer pre-buying in response to geopolitical and product supply uncertainty.

Foreign currency translation positively impacted the year-over-year change in net sales by $35.8 million.

A comparison of net sales by region follows:

(In thousands)

For the Six Months Ended June 30,

North America

Latin America

Total Surfactants Segment

Net sales for North American operations increased $46.7 million, or 10 percent, year-over-year.

Higher average selling prices had a $36.3 million favorable impact on the change in net sales and were primarily due to the pass-through of higher raw material costs, more favorable product mix and pricing actions.

Sales volume increased two percent and positively impacted the change in net sales by $10.0 million.

The higher sales volume was primarily due to higher demand for products sold into the industrial cleaning, crop productivity, and oilfield end markets, partially 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 $19.9 million, or 13 percent, due to the favorable impact of foreign currency translation, higher average selling prices and a three percent increase in sales volume.

These items positively impacted the change in net sales by $10.1 million, $5.6 million and $4.2 million, respectively.

A weaker U.S.

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

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

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

Net sales for Latin American operations increased $46.8 million, or 27 percent, due to the favorable impact of foreign currency translation, a nine percent increase in sales volume and higher average selling prices.

These items positively impacted the change in net sales by $25.2 million, $15.6 million and $6.0 million, respectively.

A weaker U.S.

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

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

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

Net sales for Asian operations decreased $17.7 million, or 67 percent, year-over-year.

An 81 percent decrease in sales volume negatively impacted the year-over-year change in net sales by $21.1 million.

The lower sales volume was mainly due to the divestiture of assets in the Philippines during the fourth quarter of 2025.

Higher average selling prices positively impacted the change in net sales by $3.4 million.

Foreign currency translation had a negligible impact year-over-year.

Surfactant operating income for the first half of 2026 increased $10.6 million, or 25 percent, versus operating income for the first half of 2025.

Gross profit increased $12.8 million, or 14 percent, and operating expenses increased $2.2 million, or four percent.

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

(In thousands)

For the Six Months Ended June 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 increased $8.5 million, or 19 percent, versus the prior year primarily due to higher average unit margins.

The higher average unit margins positively impacted the year-over-year change in gross profit by $7.6 million and were primarily attributable to more favorable product mix, pricing actions, the initial benefits from Project Catalyst actions and the non-recurrence of an environmental reserve adjustment recognized in the second quarter of 2025.

A two percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.9 million.

Gross profit for European operations increased $2.6 million, or 14 percent, due to the favorable impact of foreign currency translation, higher average unit margins and the three percent increase in sales volume.

These items positively impacted the year-over-year change in gross profit by $1.4 million, $0.7 million and $0.5 million, respectively.

Gross profit for Latin American operations increased $7.3 million, or 32 percent, due to the favorable impact of the foreign currency translation, higher average unit margins and the nine percent increase in sales volume.

These items positively impacted the year-over-year change in gross profit by $3.3 million, $2.0 million and $2.0 million, respectively.

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

Gross profit for Asia operations decreased $5.6 million year-over-year primarily due to the double-digit decrease in sales volume resulting from the asset divestiture in the Philippines during the fourth quarter of 2025.

The decline in sales volume negatively impacted the year-over-year change in gross profit by $5.9 million.

Higher average unit margins positively impacted the change in gross profit by $0.3 million.

Operating expenses for the Surfactants segment increased $2.2 million, or four percent, in the first half of 2026 versus the first half of 2025.

This increase reflects higher incentive-based compensation expenses that were partially offset by the non-recurrence of a $1.1 million USEPA penalty recognized in the second quarter of 2025.

In addition, foreign currency translation had a $1.6 million unfavorable impact on the change in operating expenses year-over-year.

Polymers net sales for the first half of 2026 decreased $0.8 million, or less than one percent, versus net sales for the same period of 2025.

Lower average selling prices negatively impacted the year-over-year change in net sales by $4.7 million.

A one percent decrease in sales volume negatively impacted the change in net sales by $2.4 million.

Foreign currency translation positively impacted the change in net sales by $6.3 million.

A comparison of net sales by region follows:

(In thousands)

For the Six Months Ended June 30,

North America

Asia and Other

Total Polymers Segment

Net sales for North American operations increased $10.0 million, or six percent, year-over-year.

Sales volume increased 10 percent and positively impacted the year-over-year change in net sales by $16.5 million.

Sales volume of polyols used in rigid foam applications and commodity phthalic anhydride increased 13 percent and 11 percent, respectively, year-over-year.

applications, spray foam sales volume increased triple digits.

Sales volume of specialty polyols decreased four percent.

Lower average selling prices negatively impacted the year-over-year change in net sales by $6.5 million.

Net sales for European operations decreased $9.6 million, or eight percent, year-over-year.

An 11 percent decrease in sales volume and lower average selling prices negatively impacted the year-over-year change in net sales by $13.9 million and $0.8 million, respectively.

The lower sales volume is due to lower construction demand related to the macroeconomic environment and economic uncertainties.

Foreign currency translation positively impacted the change in net sales by $5.1 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 $1.2 million, or five percent, primarily due to a nine percent decrease in sales volume and lower average selling prices.

These items negatively impacted the year-over-year change in net sales by $2.1 million and $0.3 million, respectively.

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

Polymer operating income in the first half of 2026 increased $6.1 million, or 24 percent, versus operating income in the first half of 2025.

Gross profit increased $6.9 million, or 17 percent and operating expenses increased $0.8 million or five percent year-over-year.

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

(In thousands)

For the Six Months Ended June 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 $10.5 million, or 57 percent, year-over-year.

This increase was primarily due to higher average unit margins and the 10 percent increase in sales volume.

These items positively impacted the year-over-year change in gross profit by $8.6 million and $1.9 million, respectively.

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

Gross profit for European operations decreased $3.1 million, or 18 percent, versus the first half of 2025.

This decrease was primarily due to the 11 percent decrease in sales volume and lower average unit margins.

These items negatively impacted the year-over-year change in gross profit by $1.9 million and $1.7 million, respectively.

Foreign currency translation positively impacted the change in gross profit by $0.5 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.

Gross profit for Asia and Other operations decreased $0.5 million, or 11 percent, year-over year.

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

These items negatively impacted the change in gross profit by $0.4 million and $0.3 million, respectively.

Foreign currency translation positively impacted the change in gross profit by $0.2 million.

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.

Operating expenses for the Polymer segment increased $0.8 million, or five percent, year-over-year.

Specialty Products

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.

Specialty Products net sales for the first half of 2026 increased $5.7 million, or 15 percent, versus net sales for the first half of 2025.

The increase was primarily due to a 15 percent increase in sales volume.

Gross profit and operating income both decreased by $1.0 million.

The year-over year decrease in both gross profit and operating income was primarily due to less favorable product mix within the MCT product line that was partially offset by higher earnings in the food and flavor business.

Corporate Expenses

Corporate expenses, which include business restructuring, deferred compensation, and other operating expenses that are not allocated to the reportable segments, increased $74.3 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.

Corporate expenses were $106.3 million in the first half of 2026 versus $32.0 million in the first half of 2025.

The increase was primarily due to a $70.5 million restructuring charge recognized in the first half of 2026.

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:

Deferred compensation expense increased $1.2 million year-over-year and was primarily due to an $8.36 per share increase in the market price of the Company's common stock during the first six months of 2026 versus a $10.12 per share decrease in the market price during the first six months of 2025.

The following table presents the period-end Company common stock market prices used in the computation of deferred compensation income/expense for the six months ended June 30, 2026 and 2025:

Company Common Stock Price

LIQUIDITY AND CAPITAL RESOURCES

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.

For the six months ended June 30, 2026, operating activities were a cash source of $25.3 million versus a cash source of $18.1 million for the comparable period in 2025.

For the first six months of 2026, investing cash outflows totaled $46.3 million versus cash outflows of $51.5 million in the prior year period.

Financing activities were a cash source of $1.2 million versus a cash source of $13.3 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 March 31, 2026, the Company's cash and cash equivalents totaled $140.8 million.

Cash and cash equivalents decreased $19.0 million compared to December 31, 2025, inclusive of an $0.8 million favorable foreign exchange rate impact.

On June 30, 2026, the Company's cash and cash equivalents totaled $113.7 million.

Cash in non-U.S.

2 unchanged sentences

The Company’s non-U.S.

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

subsidiaries held $101.8 million of cash and cash equivalents as of June 30, 2026.

Operating Activities

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 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.

Net income during the first six months of 2026 decreased $49.5 million versus the comparable period in 2025.

Working capital was a cash use of $77.2 million during the first six months of 2026 versus a cash use of $74.7 million in the comparable period in 2025.

Accounts receivable were a cash use of $104.3 million during the first six months of 2026 compared to a cash use of $31.8 million for the comparable period in 2025.

Inventories were a cash use of $24.2 million in 2026 versus a cash use of $30.7 million in 2025.

Accounts payable and accrued liabilities were a cash source of $56.4 million in 2026 compared to a cash use of $1.6 million for the same period in 2025.

Working capital requirements were higher in the first six months of 2026 compared to 2025 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 accounts payable and accrued liabilities primarily reflects higher trade payables due to escalating raw material costs.

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 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.

Cash used for investing activities decreased $5.2 million year-over-year primarily due to lower capital expenditures in the first six months of 2026 versus the same period of 2025.

For 2026, the Company estimates that total capital expenditures will be in the range of $100.0 million to $110.0 million.

1 unchanged sentence

Cash flow from financing activities was a source of $1.2 million in 2026 versus a source of $13.3 million in 2025.

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

The year-over-year change reflects higher borrowings from the Company's revolving credit agreement during the first six months of 2026 versus the prior year period.

These higher credit facility borrowings were more than offset by the non-recurrence of $75.0 million of senior unsecured notes issued in the second quarter of 2025.

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

2 unchanged sentences

The amounts involved may be material.

The Company did not purchase any shares of its common stock on the open market during the 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.

The Company did not purchase any shares of its common stock on the open market during the six months ended June 30, 2026.

At June 30, 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 $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.

Consolidated balance sheet debt increased $20.7 million, from $626.7 million on December 31, 2025 to $647.4 million on June 30, 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 $533.7 million on June 30, 2026 versus $494.0 million at December 31, 2025.

As of June 30, 2026, the ratio of net debt to net debt plus shareholders’ equity was 31.0 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 June 30, 2026, the Company’s debt included $303.4 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”), an $80.0 million delayed-draw term loan borrowed pursuant to the Company’s credit agreement, $264.0 million of short-term loans borrowed under the Company’s revolving credit facility and no foreign credit line borrowings.

As of June 30, 2026, the Company had outstanding letters of credit of $13.3 million, inclusive of $4.6 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.

2 unchanged sentences

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

As of March 31, 2026, the Company had outstanding letters of credit totaling $8.7 million under the CIC Credit Agreement.

As of June 30, 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 $4.9 million at March 31, 2026.

These outstanding letters of credit totaled $4.6 million at June 30, 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 March 31, 2026, the Company’s foreign subsidiaries had no outstanding debt.

At June 30, 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.

6 unchanged sentences

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 March 31, 2026.

The Company believes it was in compliance with the covenants under its material debt agreements as of June 30, 2026.

ENVIRONMENTAL AND LEGAL MATTERS

2 unchanged sentences

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

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.

During the first six months of 2026 and 2025, the Company’s expenditures for capital projects related to environmental matters were $1.5 million and $4.4 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 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.

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 $22.1 million and $21.1 million for the six months ended June 30, 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 $19.8 million to $46.4 million at March 31, 2026 and $19.3 million to $46.0 million at December 31, 2025.

After partial remediation payments at certain sites, the Company has estimated a range of possible environmental and legal losses of $19.6 million to $46.5 million at June 30, 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.

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

The Company's environmental and legal accruals totaled $19.6 million at June 30, 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.

Cash expenditures related to environmental remediation and certain other legal matters approximated $0.7 million for the six months ended June 30, 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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Management uses these non-GAAP financial measures to assist in analyzing what management views as the Company’s core operating performance for purposes of business decision making.

Management believes that presenting these non-GAAP financial measures provides investors with useful supplemental information because they (i) provide meaningful supplemental information regarding financial performance by excluding items affecting comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions and evaluate the Company’s core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating the Company’s financial results.

Management believes that presenting these non-GAAP

financial measures provides investors with useful supplemental information because they (i) provide meaningful supplemental information regarding financial performance by excluding items affecting comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions and evaluate the Company’s core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating the Company’s financial results.

In addition, the Company believes that the presentation of these non-GAAP financial measures, when considered together with the most directly comparable GAAP financial measures and the reconciliations to those GAAP financial measures, provides investors with additional tools to understand the factors and trends affecting the Company’s underlying business than could be obtained absent these disclosures.

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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(In millions, except per share amounts)

March 31, 2026

March 31, 2025

Net Income (Loss)

June 30, 2026

June 30, 2025

Net Income 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

Adjusted Net Income

Six Months Ended

(In millions, except per share amounts)

June 30, 2026

June 30, 2025

Net Income (Loss)

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For the Three Months

Ended March 31,

Ended June 30,

($ in millions)

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Other, Net Income

Deferred Compensation Income

Deferred Compensation

Environmental Remediation

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Adjusted EBITDA

For the Six Months

Ended June 30,

($ in millions)

Operating Income (Loss)

Depreciation and Amortization

Other, Net Income

Deferred Compensation Expense (Income)

Environmental Remediation

Business Restructuring

Adjusted EBITDA

Reconciliations of Non-GAAP Net Debt

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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