What changed in this filing

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Item 1. Financial Statements

2020-07-30 compared with 2020-04-30 · 163 added, 107 removed, 495 unchanged (35% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Cost of Sales

10 unchanged sentences

Provision for Income Taxes

Net Loss Attributable to Noncontrolling Interests (Note 2)

Net (Income) Loss Attributable to Noncontrolling Interests (Note 2)

Net Income Attributable to Stepan Company

6 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income:

11 unchanged sentences

(Dollars in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

39 unchanged sentences

(In thousands)

Three Months Ended March 31

Six Months Ended June 30

Cash Flows From Operating Activities

3 unchanged sentences

Deferred compensation

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

Realized and unrealized gains on long-term investments

Stock-based compensation

8 unchanged sentences

Deferred revenues

Net Cash (Used In) Provided By Operating Activities

Net Cash Provided By Operating Activities

Cash Flows From Investing Activities

4 unchanged sentences

Revolving debt and bank overdrafts, net

Other debt repayments

Dividends paid

12 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

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

In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of March 31, 2020, and its results of operations and cash flows for the three months ended March 31, 2020 and 2019, have been included.

In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of June 30, 2020, and its results of operations for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019, have been included.

These financial statements and related footnotes should be read in conjunction with the financial statements and related footnotes included in the Company’s 2019 Annual Report on Form 10-K.

RECONCILIATIONS OF EQUITY

Below are reconciliations of total equity, Company equity and equity attributable to noncontrolling interests for the three months ended March 31, 2020 and 2019:

Below are reconciliations of total equity, Company equity and equity attributable to noncontrolling interests for the three and six months ended June 30, 2020 and 2019:

(In thousands, except share and per share amounts)

2 unchanged sentences

Noncontrolling

Balance, December 31, 2019

Balance at March 31, 2020

Issuance of 3,933 shares of common stock under stock option plan

4 unchanged sentences

Common stock ($ 0.28 per share)

Balance, March 31, 2020

Balance at June 30, 2020

(In thousands, except share and per share amounts)

2 unchanged sentences

Noncontrolling

Balance at December 31, 2019

Issuance of 6,680 shares of common stock under stock option plan

Purchase of 160,780 shares of common stock

Stock-based and deferred compensation

Other comprehensive income

Cash dividends paid:

Common stock ($ 0.56 per share)

Balance at June 30, 2020

(In thousands, except share and per share amounts)

Comprehensive

Income (Loss)

Noncontrolling

Balance at March 31, 2019

Issuance of 4,423 shares of common stock under stock option plan

Purchase of 69,736 shares of common stock

Stock-based and deferred compensation

Other comprehensive income

Cash dividends paid:

Common stock ($ 0.25 per share)

Balance at June 30, 2019

(In thousands, except share and per share amounts)

Comprehensive

Income (Loss)

Noncontrolling

Balance, December 31, 2018

5 unchanged sentences

Common stock ($ 0.50 per share)

Balance, March 31, 2019

Balance at June 30, 2019

Reflects the noncontrolling interest in the Company’s China joint venture.

3 unchanged sentences

FAIR VALUE MEASUREMENTS

The following were the financial instruments held by the Company at March 31, 2020, and December 31, 2019, and the methods and assumptions used to estimate the instruments’ fair values:

The following were the financial instruments held by the Company at June 30, 2020, and December 31, 2019, and the methods and assumptions used to estimate the instruments’ fair values:

Cash and cash equivalents

13 unchanged sentences

The fair value of debt with original maturities greater than one year comprised the combined present values of scheduled principal and interest payments for each of the various loans, individually discounted at rates equivalent to those which could be obtained by the Company for new debt issues with durations equal to the average life to maturity of each loan.

The fair values of the remaining Company debt obligations approximated their carrying values due to the short-term nature of the debt.

The fair values of

the remaining Company debt obligations approximated their carrying values due to the short-term nature of the debt.

The Company’s fair value measurements for debt fall within level 2 of the fair value hierarchy.

At March 31, 2020, and December 31, 2019, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $ 720,000 and $ 754,000 as of March 31, 2020 and December 31, 2019, respectively):

At June 30, 2020, and December 31, 2019, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $ 685,000 and $ 754,000 as of June 30, 2020 and December 31, 2019, respectively):

(In thousands)

Carrying value

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of March 31, 2020, and December 31, 2019, and the level within the fair value hierarchy in which the fair value measurements fall:

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of June 30, 2020, and December 31, 2019, and the level within the fair value hierarchy in which the fair value measurements fall:

(In thousands)

19 unchanged sentences

Gains and losses arising from recording the foreign exchange contracts at fair value are reported in earnings as offsets to the losses and gains reported in earnings arising from the re-measurement of the asset and liability balances into the applicable functional currencies.

At March 31, 2020, and December 31, 2019, the Company had open forward foreign currency exchange contracts, all with durations of one to three months , to buy or sell foreign currencies with U.S.

At June 30, 2020, and December 31, 2019, the Company had open forward foreign currency exchange contracts, all with durations of one to three months , to buy or sell foreign currencies with U.S.

dollar equivalent amounts of $ 43,238,000 and $ 48,540,368 , respectively.

The fair values of the derivative instruments held by the Company on March 31, 2020, and December 31, 2019, are disclosed in Note 3.

Derivative instrument gains and losses for the three-month periods ended March 31, 2020 and 2019, were immaterial.

For amounts reclassified out of accumulated other comprehensive income (loss) (AOCI) into earnings for the three-month periods ended March 31, 2020 and 2019, see Note 11.

The fair values of the derivative instruments held by the Company on June 30, 2020, and December 31, 2019, are disclosed in Note 3.

Derivative instrument gains and losses for the three- and six-month periods ended June 30, 2020 and 2019, were immaterial.

For amounts reclassified out of accumulated other comprehensive income (loss) (AOCI) into earnings for the three- and six-month periods ended June 30, 2020 and 2019, see Note 11.

STOCK-BASED COMPENSATION

On March 31, 2020, the Company had stock options, stock awards and stock appreciation rights (SARs) outstanding under its 2011 Incentive Compensation Plan.

SARs granted prior to 2015 are cash-settled, and SARs granted after 2014 are stock-settled.

On June 30, 2020, the Company had stock options, stock awards and stock appreciation rights (SARs) outstanding under its 2011 Incentive Compensation Plan.

SARs granted prior to 2015 are cash-settled, and SARs granted in 2015 and later are stock-settled.

Stock options and SARs granted prior to 2017 generally cliff vested after two years .

Starting in 2017, stock options and SARs have a three-year graded vesting feature, with one-third of the awards vesting each year.

Starting in 2017, stock options and

SARs have a three-year graded vesting feature, with one-third of the awards vesting each year.

The Company has elected the straight-line method of expense attribution for the stock options and SARs with the graded vesting feature.

2 unchanged sentences

Three Months Ended

The quarter-over-quarter decrease in stock-based compensation expense was primarily attributable to cash-settled SARs.

The quarterly decrease in cash-settled SARs compensation expense reflects a decrease in the market value of Company stock during the first quarter of 2020 versus an increase in the first quarter of 2019.

Six Months Ended

The increase in stock-based compensation expense for the second quarter of 2020 compared to the second quarter of 2019 was primarily attributable to cash-settled SARs.

The increase in cash-settled SARs compensation expense reflects a larger increase in the market value of Company stock during the second quarter of 2020 versus the increase in the market value of Company stock during the second quarter of 2019.

Unrecognized compensation costs for stock options, stock awards and SARs were as follows:

(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

3 unchanged sentences

Stock awards (at target)

The unrecognized compensation costs at March 31, 2020, are expected to be recognized over weighted-average periods of 2.2 years for stock options, 2.1 years for stock awards and 2.2 years for SARs.

The composition of inventories at March 31, 2020, and December 31, 2019, was as follows:

The unrecognized compensation costs at June 30, 2020, are expected to be recognized over a weighted-average period of 2.0 years for stock options, stock awards and SARs.

The composition of inventories at June 30, 2020, and December 31, 2019, was as follows:

(In thousands)

March 31, 2020

December 31, 2019

Finished goods

1 unchanged sentence

Total inventories

The Company adopted ASU No.

2016-02, Leases (Topic 842) , on January 1, 2019.

This new accounting standard requires a dual approach for lessee accounting whereby a lessee accounts for lease arrangements as either finance leases or operating leases.

The lease classification affects the pattern of expense recognition in the income statement.

The most significant impact of adopting ASU No.

2016-02, Leases (Topic 842) is that a lessee is now required to recognize a “right-of-use” (ROU) asset and corresponding lease liability for operating lease agreements.

ROU assets represent a right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease.

Operating leases are expensed on a straight-line basis over the life of the lease beginning on the date the Company takes possession of the property.

The Company’s operating leases are primarily comprised of railcars, real estate, storage tanks, autos, trailers and manufacturing/office equipment.

Railcars and real estate comprise approximately 46 percent and 37 percent, respectively, of the Company’s consolidated ROU asset balance.

With the exception of real estate, typical lease terms range from one to ten years .

Except for real estate, typical lease terms range from one to ten years .

Real estate lease terms typically range from one to fifty years .

The Company’s two principal real estate leases relate to land leases in the Philippines and Singapore.

As of March 31, 2020, the Company had additional leases, primarily for equipment and storage tanks, that have not commenced of approximately $ 731,000 .

These leases will commence in the second quarter of 2020 with lease terms ranging from three to five years .

Variability associated with the Company’s lease obligations typically relates to:

(i) additional charges based on usage (i.e.

, railcar mileage in excess of a specified amount) and, (ii) periodic increases associated with Consumer Price Index (CPI) changes (i.e.

, land rental payments).

Appropriate CPI at the inception of a lease is reflected in the Company’s lease liability balances whereas variability based on usage is typically excluded from lease liability amounts.

Some of the Company’s leases include options to extend the lease term but these are typically not recognized as part of the ROU asset or lease liability at inception unless it is reasonably certain the renewal option will be exercised.

Determining whether a renewal option is reasonably certain to be exercised requires judgment based on the existing facts and circumstances as well as expectations about future business needs.

Renewal options are typically re-assessed within one year or less prior to lease termination when the Company is able to more accurately forecast future business needs.

Some of the Company’s lease contracts include options to terminate leases early but these are typically not considered unless it is reasonably certain the early termination option will be exercised.

The Company’s leases do not typically carry any residual value guarantees and typically payment is not considered probable when such guarantees are included in the contract.

As of June 30, 2020, the Company had an approximately $ 612,000 storage tank lease that had not commenced.

This lease will commence in the third quarter of 2020 with a lease term of four years .

As most of the Company’s leases do not provide an implicit borrowing rate, the Company uses its incremental borrowing rate (IBR) based on the information available at the commencement date in determining the present value of lease payments.

1 unchanged sentence

IBR was used for all other countries as the leases in these countries are not material.

The total value of leases that reside in the five countries identified above represents approximately 97 percent of the Company’s consolidated ROU asset balance.

The total value of leases of property in the five countries identified above represents approximately 98 percent of the Company’s consolidated ROU asset balance.

(In thousands)

March 31, 2020

Three months ended

June 30, 2020

Six months ended

June 30, 2020

Operating lease cost

8 unchanged sentences

Undiscounted Cash Flows:

2020 (excluding the three months ended March 31, 2020)

2020 (excluding the six months ended June 30, 2020)

Subsequent to 2024

12 unchanged sentences

The Company’s operations are subject to extensive local, state and federal regulations, including the U.S.

Comprehensive

Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and the Superfund amendments of 1986 (Superfund) as well as comparable regulations applicable to the Company’s foreign l ocations.

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

Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and the Superfund amendments of 1986 (Superfund) as well as comparable regulations applicable to the Company’s foreign locations.

In addition, damages are being claimed against the Company in general liability actions for alleged personal injury or property damage in the case of some disposal and plant sites.

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

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

In determining the appropriate level of environmental reserves, the Company considers several factors such as information obtained from investigatory studies;

5 unchanged sentences

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

As of March 31, 2020, the Company estimated a range of possible environmental and legal losses of $ 24.9 million to $ 43.0 million.

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 ranges and, thus, has accrued at the lower end of the range.

These accruals totaled $ 24.9 million at March 31, 2020 and $ 25.9 million at December 31, 2019.

As of June 30, 2020, the Company estimated a range of possible environmental and legal losses of $ 22.7 million to $ 41.7 million.

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.

These accruals totaled $ 22.7 million at June 30, 2020 and $ 25.9 million at December 31, 2019.

Although the Company believes that its reserves are adequate for environmental contingencies, it is possible due to the uncertainties noted above, that additional reserves could be required in the future.

Cash expenditures related to legal and environmental matters approximated $ 0.9 million and $ 0.2 million for the three-month periods ended March 31, 2020 and 2019, respectively.

Cash expenditures related to legal and environmental matters approximated $ 3.1 million and $ 2.5 million for the six-month periods ended June 30, 2020 and 2019, respectively.

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

3 unchanged sentences

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

Following are summaries of the Company’s major contingencies at March 31, 2020:

Following are summaries of the Company’s major contingencies at June 30, 2020:

Maywood, New Jersey Site

18 unchanged sentences

The changes in range of possible losses and liability balance were immaterial.

Remediation work is continuing at the D’Imperio site.

Based on current information, the Company believes that its recorded liability is reasonable having considered the range of estimated cost of remediation for the D’Imperio site.

Remediation work continues at the D’Imperio site.

Based on current information, the Company believes that its recorded liability is reasonable having considered the range of estimated cost of

remediation for the D’Imperio site.

Depending on the ultimate cost of the remediation at this site, the amount for which the Company is liable could differ materially from the current estimates.

3 unchanged sentences

Under the Company’s October 1, 1993, agreement with the current owner of the Wilmington site, once total site remediation costs exceed certain levels, the Company is obligated to contribute up to five percent of future response costs associated with this site with no limitation on the ultimate amount of contributions.

The Company has paid the current owner $ 2.9 million for the Company’s portion of environmental response costs at the Wilmington site through March 31, 2020.

The Company has paid the current owner $ 2.9 million for the Company’s portion of environmental response costs at the Wilmington site through June 30, 2020.

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

13 unchanged sentences

UNITED STATES

UNITED KINGDOM

(In thousands)

Three Months Ended

Six Months Ended

Interest cost

Expected return on plan assets

Amortization of net actuarial loss

Net periodic benefit cost (income)

UNITED KINGDOM

(In thousands)

Three Months Ended

Six Months Ended

Interest cost

1 unchanged sentence

Amortization of net actuarial loss

Net periodic (benefit) cost

Net periodic benefit cost (income)

Employer Contributions

2 unchanged sentences

Approximately $ 299,000 is expected to

be paid to the unfunded non-qualified plans in 2020.

Of such amount, $ 143,000 had been paid related to the non-qualified pl ans as of March 31, 2020.

be paid related to the unfunded non-qualified plans in 2020.

Of such amount, $ 195,000 had been paid related to the non-qual ified plans as of June 30, 2020.

The Company’s U.K.

subsidiary expects to contribute approximately $ 495,000 to its defined benefit pension plan in 2020.

Of such amount, $ 168,000 had been contributed to the plan as of March 31, 2020.

Of such amount, $ 284,000 had been contributed to the plan as of June 30, 2020.

Defined Contribution Plans

2 unchanged sentences

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

In the three months ended March 31, 2020 and 2019, the Company made profit sharing contributions into the qualified retirement plans for U.S.

In the six months ended June 30, 2020 and 2019, the Company made profit sharing contributions into the qualified retirement plans for U.S.

employees and for certain non-U.S.

6 unchanged sentences

Three Months Ended

Six Months Ended

Retirement savings contributions

Profit sharing contributions

Total defined contribution plan expenses

Profit sharing contributions plan

The Company has a rabbi trust to fund the obligations of its non-qualified supplemental executive defined contribution plans (supplemental plans).

4 unchanged sentences

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

At March 31, 2020, the balance of the trust assets was $ 1,619,000 , which equaled the balance of the supplemental plan liabilities (see the long-term investments section in Note 3 for further information regarding the Company’s mutual fund assets).

At June 30, 2020, the balance of the trust assets was $ 1,740,000 , which equaled the balance of the supplemental plan liabilities (see the long-term investments section in Note 3 for further information regarding the Company’s mutual fund assets).

EARNINGS PER SHARE

Below are the computations of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019:

Below are the computations of basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019:

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

Computation of Basic Earnings per Share

Net income attributable to Stepan Company

Weighted-average number of common shares outstanding

Weighted-average number of common shares

Basic earnings per share

8 unchanged sentences

exercise of SARs (under treasury stock method) (1)

Add weighted-average contingently issuable net shares

related to performance stock awards (under treasury stock method)

Weighted-average shares applicable to diluted earnings

Add weighted-average contingently issuable net

shares related to performance stock awards

(under treasury stock method)

Weighted-average shares applicable to diluted

Diluted earnings per share

(1) Options/SARs to acquire 256,288 and 214,241 shares of Company common stock were excluded from the computations of diluted earnings per share for the three months ended March 31, 2020 and March 31, 2019.

Inclusion of the instruments would have had an antidilutive effect on the earnings per share computations.

(1) Options/SARs to acquire 253,448 and 254,868 shares of Company common stock were excluded from the computations of diluted earnings per share for the three and six months ended June 30, 2020, respectively.

Options/SARs to acquire 215,257 and 214,749 shares of Company common stock were excluded from the computations of diluted earnings per share for the three and six months ended June 30, 2019, respectively.

Inclusion of the instruments would have had antidilutive effects on the computations of the earnings per share.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Below is the change in the Company’s AOCI balance by component (net of income taxes) for the three months ended March 31, 2020 and 2019:

Below is the change in the Company’s AOCI balance by component (net of income taxes) for the three and six months ended June 30, 2020 and 2019:

(In thousands)

Balance at March 31, 2019

Other comprehensive income before reclassifications

Amounts reclassified from AOCI

Net current-period other comprehensive income

Balance at June 30, 2019

Balance at March 31, 2020

Other comprehensive income before reclassifications

Amounts reclassified from AOCI

Net current-period other comprehensive income

Balance at June 30, 2020

Balance at December 31, 2018

3 unchanged sentences

Net current-period other comprehensive income

Balance at March 31, 2019

Balance at June 30, 2019

Balance at December 31, 2019

2 unchanged sentences

Net current-period other comprehensive income

Balance at March 31, 2020

Balance at June 30, 2020

Represents reclassification of the stranded tax effects resulting from the U.S.

Tax Cuts and Jobs Act (Tax Act) from accumulated other comprehensive income (loss) to retained earnings in accordance with ASU 2018-02.

Information regarding the reclassifications out of AOCI for the three-month periods ended March 31, 2020 and 2019, is displayed below:

Information regarding the reclassifications out of AOCI for the three- and six-month periods ended June 30, 2020 and 2019, is displayed below:

(In thousands)

2 unchanged sentences

Three Months Ended

Six Months Ended

Affected Line Item in

11 unchanged sentences

Surfactants, Polymers and Specialty Products.

Net sales by segment for the three months ended March 31, 2020 and 2019, were as follows:

Net sales by segment for the three and six months ended June 30, 2020 and 2019, were as follows:

(In thousands)

Three Months Ended

Six Months Ended

Segment Net Sales

Specialty Products

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three months ended March 31, 2020 and 2019, are summarized below:

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three and six months ended June 30, 2020 and 2019, are summarized below:

(In thousands)

Three Months Ended

Six Months Ended

Segment Operating Income

6 unchanged sentences

Income before provision for income taxes

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

REVENUE FROM CONTRACTS WITH CUSTOMERS

3 unchanged sentences

For a small portion of the business, performance obligations are deemed satisfied when product is delivered to a customer location.

As of March 31, 2020, the Company had $ 274,000 of contract liabilities and no contract assets.

As of June 30, 2020, the Company had $ 593,000 of contract liabilities and no contract assets.

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

1 unchanged sentence

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

The Company recognized $ 350,000 of revenue in the current period from pre-existing contract liabilities at December 31, 2019.

The tables below provide a geographic disaggregation of net sales for the three months ended March 31, 2020 and 2019.

The Company recognized $ 350,000 of revenue in the first six months of 2020 from pre-existing contract liabilities at December 31, 2019.

The tables below provide a geographic disaggregation of net sales for the three and six months ended June 30, 2020 and 2019.

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

For the Three Months Ended March 31, 2020

For the Three Months Ended June 30, 2020

(In thousands)

Specialty Products

Geographic Market

1 unchanged sentence

Latin America

For the Three Months Ended March 31, 2019

For the Three Months Ended June 30, 2019

(In thousands)

Specialty Products

Geographic Market

1 unchanged sentence

Latin America

Debt was comprised of the following at March 31, 2020, and December 31, 2019:

For the Six Months Ended June 30, 2020

(In thousands)

Specialty Products

Geographic Market

North America

Latin America

For the Six Months Ended June 30, 2019

(In thousands)

Specialty Products

Geographic Market

North America

Latin America

At June 30, 2020, and December 31, 2019, debt was comprised of the following:

(In thousands)

Unsecured private placement notes

6 unchanged sentences

The Company maintains 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 revolving credit agreement.

As of March 31, 2020, the Company had outstanding letters of credit totaling $ 4,929,000 and no borrowings under the revolving credit agreement.

There was $ 345,071,000 available under the revolving credit agreement as of March 31, 2020.

As of June 30, 2020, the Company had outstanding letters of credit totaling $ 5,476,000 and no borrowings under the revolving credit agreement.

There was $ 344,524,000 available under the revolving credit agreement as of June 30, 2020.

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

Based on the loan agreement provisions that place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $ 298,207,000 and $ 283,956,000 at March 31, 2020 and December 31, 2019, respectively.

Based on the loan agreement provisions that

place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $ 321,609,000 and $ 283,956,000 at June 30, 2020 and December 31, 2019, respectively .

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

1 unchanged sentence

Three Months Ended

Foreign exchange gains

Six Months Ended

Foreign exchange gain (loss)

Investment income

Realized and unrealized gains (losses) on investments

Realized and unrealized gains on investments

Net periodic pension benefit cost

4 unchanged sentences

During the third quarter of 2018, the Company approved a plan to shut down Surfactant operations at its German plant site.

As of March 31, 2020, an aggregate of $ 2,392,000 shut down related expense has been recognized at the site.

As of June 30, 2020, an aggregate of $ 2,392,000 shut down related expense has been recognized at the site.

This aggregate expense is comprised of $ 1,404,000 of asset and spare part write downs recognized in 2018 and $ 988,000 of cumulative decommissioning costs.

The Company recognized $ 79,000 and $ 187,000 of decommissioning expenses in the first quarter of 2020 and 2019, respectively.

The Company recognized $ 208,000 in decommissioning expenses in the second quarter of 2019 and did no t incur any decommissioning expenses in the second quarter of 2020.

For the six months of 2020 and 2019, the Company recognized $ 79,000 and $ 395,000 of decommissioning expenses, respectively.

In the fourth quarter of 2017, the Company approved a plan to restructure a portion of its Fieldsboro, New Jersey production facility.

5 unchanged sentences

Decommissioning of the assets is expected to continue throughout 2020.

As of March 31, 2020, $ 7,762,000 of aggregate restructuring expense has been recognized, reflecting $ 1,644,000 of termination benefits for approximately 30 employees and $ 6,118,000 for other expenses, principally site decommissioning costs.

The Company recognized $ 278,000 and $ 322,000 of decommissioning expenses in the first quarter of 2020 and 2019, respectively.

As of June 30, 2020, $ 7,987,000 of aggregate restructuring expense has been recognized, reflecting $ 1,644,000 of termination benefits for approximately 30 employees and $ 6,343,000 for other expenses, principally site decommissioning costs.

The Company recognized $ 225,000 and $ 200,000 of decommissioning expenses in the second quarter of 2020 and 2019, respectively.

The Company recognized $ 503,000 and $ 521,000 of decommissioning expenses in the first six months of 2020 and 2019, respectively.

2020 Acquisition

4 unchanged sentences

All assets acquired are included in the Company’s Surfactants segment.

The fair value allocation was updated in the second quarter of 2020.

The assets acquired were primarily intangibles, including trademarks and know-how ($ 1,392,000 ) and patents ($ 464,000 ).

18 unchanged sentences

The amendments in the update are effective for fiscal years, and interim periods within fiscal years, beginning after December 15, 2019.

adopted ASU No.

The Company adopted ASU No.

2016-13 in the first quarter of 2020.

12 unchanged sentences

The adoption of the guidance in ASU No.

2017-4 did not have a material effect on the Company’s financial position, results of operations or cash flows.

2017-4 has not had an effect on the Company’s financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU No.

15 unchanged sentences

The amendments in this update are effective for fiscal years ending after December 15, 2020.

The adoption of this update is not expected to have an effect on the Company’s financial position, results of operations and cash flows but will impact the disclosures made for the Company’s defined benefit retirement plans.

The adoption of this update is not expected to have an effect on the Company’s

financial position, results of operations and cash flows but will impact the disclosures made for the Company’s defined benefit retirement plans.

In December 2019, the FASB issued ASU No.

6 unchanged sentences

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

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

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

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

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements