What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-07-30 · 319 added, 266 removed, 368 unchanged (61% of the section changed)

39 unchanged sentences

The overall business comprises three reportable segments:

Surfactants – Surfactants, which accounted for 72 percent of Company consolidated net sales for the first half of 2020, 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 Company consolidated net sales for the first nine months of 2020, 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, lubricating ingredients, emulsifiers for spreading agricultural products and industrial applications such as latex systems, plastics and composites.

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

Recent significant events in clude:

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

Recent significant events include:

On January 19, 2020, the Company experienced a power disruption that impacted its Millsdale, Illinois facility.

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All production lines were fully operational prior to the end of the first quarter.

The Company’s insurance provider has acknowledged this incident is a covered event and the Company is pursuing insurance recovery for incremental supply chain expenses and business interruption.

These operational issues negatively impacted the Company’s earnings during the first nine months of 2020.

The Company’s insurance provider has acknowledged this incident is a covered event.

During the third quarter of 2020 the Company recognized $5.0 million partial insurance recovery related to this incident.

This insurance recovery was recognized as a reduction of expenses within cost of sales.

Surfactant and Polymer segment operating income benefited $2.2 million and $2.8 million, respectively, in the third quarter of 2020.

The Company continues to work with its insurance provider on the remainder of the claim.

In September 2020 the Company, through its subsidiaries in Mexico, acquired Clariant (Mexico) S.A.

de C.V.’s (Clariant) anionic surfactant business located in Santa Clara, Mexico.

The acquisition did not include the purchase of a manufacturing site.

The business acquired will be integrated into the Company’s two existing manufacturing sites in Mexico (Matamoros and Ecatepec).

This acquisition supports the Company’s growth strategy in Latin America and the Company believes the acquisition will enhance its ability to support customer growth in the Mexican consumer and functional surfactant markets (see Note 17, Acquisitions , for additional details).

In March 2020 the Company acquired certain assets of Logos Technologies LLC's NatSurFact® business, a rhamnolipid-based line of bio-surfactants derived from renewable sources.

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Decommissioning costs associated with the shutdown were incurred in 2019 and continued through the first quarter of 2020 (see Note 16, Business Restructuring , for additional details).

Polymers – Polymers, which accounted for 24 percent of consolidated net sales for the first half of 2020, include polyurethane polyols, polyester resins and phthalic anhydride.

Polymers – Polymers, which accounted for 24 percent of consolidated net sales for the first nine months of 2020, 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).

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Recent significant events include:

The operational issues at the Company’s Millsdale, Illinois facility, described in the significant event paragraph above, negatively impacted Polymers earnings during the first half of 2020.

Specialty Products – Specialty Products, which accounted for four percent of consolidated net sales for the first half of 2020, include flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.

The operational issues at the Company’s Millsdale, Illinois facility, described in the Surfactants significant events paragraph above, negatively impacted Polymers earnings during the first nine months of 2020.

the third quarter of 2020, the Polymer segment recognized $2.8 million partial insuran ce recovery related to the Millsdale incident (see above).

Specialty Products – Specialty Products, which accounted for three percent of consolidated net sales for the first nine months of 2020, 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 and, in some instances, at outside contractors.

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This restructuring was undertaken to better align the number of personnel with current business requirements and reduce costs at the site (see Note 16, Business Restructuring , for additional details).

2020 Acquisition

2020 Acquisitions

Logos Technologies

On March 13, 2020, the Company acquired certain assets of Logos Technologies LLC's NatSurFact® business, a rhamnolipid-based line of bio-surfactants derived from renewable sources.

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Additionally, $184,000 of laboratory equipment was acquired (see Note 17, Acquisitions , for additional details).

Clariant (Mexico)

On September 17, 2020 the Company, through its subsidiaries in Mexico, acquired Clariant’s anionic surfactant business and select sulfonation equipment located in Santa Clara, Mexico.

The acquisition did not include the purchase of a manufacturing site.

The business acquired will be integrated into the Company’s two existing manufacturing sites in Mexico (Matamoros and Ecatepec).

The Company believes the purchase of Clariant’s surfactants business will enhance its ability to support customer growth in consumer and functional products end markets within Mexico.

The acquisition was accounted for as a business combination, and accordingly, the assets acquired were measured and recorded at their preliminary estimated fair values.

The purchase price of the acquisition was $14,000,000 plus associated value-added taxes (VAT).

As of September 30, 2020, $13,519,000, inclusive of $308,000 net VAT, had been paid with cash on hand.

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

The assets acquired as of September 30, 2020 were intangibles, including trademarks and know-how ($2,802,000), customer lists ($4,814,000), a non-compete agreement ($1,000,000) and goodwill ($4,595,000).

See Note 17, Acquisitions , for additional details.

Deferred Compensation Plans

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For the Three Months

Ended June 30

Ended September 30

(In millions)

Deferred Compensation (Operating expenses)

Realized/Unrealized Gains on Investments (Other, net)

Realized/Unrealized Gains/(Losses) on Investments (Other, net)

Investment Income (Other, net)

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Income (Expense)

For the Six Months

Ended June 30

For the Nine Months

Ended September 30

(In millions)

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dollar results).

The following tables present the effects that foreign currency translation had on the period-over-period changes in consolidated net sales and various income statement line items for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

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Pretax Income

Six Months Ended

Nine Months Ended

(In millions)

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RESULTS OF OPERATIONS

Three Months Ended June 30, 2020 and 2019

Net income attributable to the Company for the second quarter of 2020 increased 18 percent to $35.7 million, or $1.54 per diluted share, from $30.2 million, or $1.30 per diluted share, for the second quarter of 2019.

Adjusted net income increased nine percent to $38.3 million, or $1.65 per diluted share, from $35.1 million, or $1.50 per diluted share, in 2019 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for reconciliations between reported net income attributable to the Company and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).

Below is a summary discussion of the major factors leading to the changes in net sales, profits and expenses in the second quarter of 2020 compared to the second quarter of 2019.

A detailed discussion of segment operating performance for the second quarter of 2020 compared to the second quarter of 2019 follows the summary.

Consolidated net sales decreased $12.5 million, or three percent, between quarters.

Consolidated sales volume increased four percent, which had an $18.9 million favorable impact on the change in net sales.

Sales volume in the Surfactant segment increased 10 percent while sales volume in the Polymer segment decreased 13 percent.

Three Months Ended September 30, 2020 and 2019

Net income attributable to the Company for the third quarter of 2020 increased 28 percent to $33.2 million, or $1.43 per diluted share, from $25.9 million, or $1.11 per diluted share, for the third quarter of 2019.

Adjusted net income increased 30 percent to $36.4 million, or $1.56 per diluted share, from $27.9 million, or $1.20 per diluted share, in 2019 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for reconciliations between reported net income attributable to the Company and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).

Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the third quarter of 2020 compared to the third quarter of 2019.

A detailed discussion of segment operating performance for the third quarter of 2020 compared to the third quarter of 2019 follows the summary.

Consolidated net sales increased $12.9 million, or three percent, between quarters.

Consolidated sales volume increased five percent, which had a $20.5 million favorable impact on the change in net sales.

Sales volume in the Surfactant segment increased eight percent while sales volume in the Polymer segment decreased five percent.

Specialty Products sales volume was flat between quarters.

Foreign currency translation negatively impacted the change in net sales by $20.2 million due to a stronger U.S.

dollar against the majority of currencies where the Company has foreign operations.

Lower average selling prices negatively impacted the change in net sales by $11.2 million.

The decrease in average selling prices was primarily due to the pass through of lower raw material costs.

Operating income for the second quarter of 2020 increased $3.5 million, or nine percent, compared to operating income for the second quarter of 2019.

Surfactant operating income increased $16.4 million or 51 percent versus the second quarter of 2019.

Foreign currency translation negatively impacted the change in net sales by $9.7 million primarily due to a stronger U.S.

dollar against the Latin America currencies where the Company has foreign operations.

Higher average selling prices positively impacted the change in net sales by $2.1 million.

Operating income for the third quarter of 2020 increased $14.4 million, or 52 percent, compared to operating income for the third quarter of 2019.

Surfactant operating income increased $21.5 million, or 109 percent, versus the third quarter of 2019.

Polymer and Specialty Product operating income decreased $0.9 million and $0.7 million, respectively.

Foreign currency translation had a $3.3 million unfavorable impact on segments’ operating income in the second quarter of 2020 versus same period in 2019.

Deferred compensation expenses increased $4.1 million in the second quarter of 2020 versus the second quarter of 2019.

Business restructuring expenses decreased $0.2 million and corporate expenses (excluding deferred compensation and business restructuring expenses) decreased $1.0 million between quarters.

Most of the corporate decrease reflects lower environmental remediation expenses in 2020.

Operating expenses (including deferred compensation and business restructuring expense) increased $2.0 million, or four percent, between quarters.

Surfactant and Polymer operating income benefited $2.2 million and $2.8 million, respectively, from partial insurance recovery related to the first quarter 2020 Millsdale, IL power outage.

Foreign currency translation had a $2.2 million unfavorable impact on segment operating income in the third quarter of 2020 versus the same period in 2019.

Deferred compensation expenses increased $4.0 million in the third quarter of 2020 versus the third quarter of 2019.

Business restructuring expenses decreased $0.3 million and corporate expenses (excluding deferred compensation and business restructuring expenses) increased $1.8 million between quarters.

Most of the corporate expense increase reflects higher incentive-based compensation expenses and higher consulting fees partially related to acquisition activities.

Operating expenses (including deferred compensation and business restructuring expenses) increased $5.2 million, or 11 percent, between quarters.

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

Selling expenses declined $1.2 million, or nine percent, due to lower travel and entertainment expenses as a result of COVID-19 travel restrictions.

Administrative expenses decreased $0.8 million, or four percent, primarily due to lower environmental remediation expenses in 2020.

Research, development and technical service (R&D) expenses increased $0.2 million, or one percent.

Deferred compensation expense increased $4.1 million primarily due to a $8.64 per share increase in the market price of Company common stock in the second quarter of 2020 compared to a $4.39 per share increase in the second quarter of 2019.

Selling expenses declined $0.9 million, or six percent, largely due to lower travel and entertainment expenses as a result of COVID-19 travel restrictions.

Administrative expenses increased $1.6 million, or eight percent, primarily due to higher incentive-based compensation expenses and consulting fees.

The higher consulting fees were partially related to acquisition activities.

Research, development and technical service (R&D) expenses increased $0.8 million, or six percent primarily due to higher incentive-based compensation expenses.

Deferred compensation expense increased $4.0 million primarily due to an $11.90 per share increase in the market price of Company common stock in the third quarter of 2020 compared to a $5.15 per share increase in the third quarter of 2019.

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

Business restructuring charges totaled $0.2 million in the second quarter of 2020 versus $0.5 million in 2019.

The 2020 restructuring charges reflect ongoing decommissioning costs associated with the Company’s manufacturing facility in Canada ($0.2 million).

The 2019 restructuring charges included decommissioning costs associated with the 2016 Canadian plant closure ($0.2 million), decommissioning expenses associated with the 2018 sulfonation shutdown in Germany ($0.2 million) and costs related to the 2019 Specialty Product restructuring ($0.1 million).

Business restructuring charges totaled $0.1 million in the third quarter of 2020 versus $0.5 million in 2019.

The 2020 restructuring charges reflect ongoing decommissioning costs associated with the Company’s manufacturing facility in Canada.

The 2019 restructuring charges included decommissioning costs associated with the 2016 Canadian plant closure ($0.3 million) and decommissioning expenses associated with the Company’s 2018 sulfonation shutdown in Germany ($0.2 million).

See Note 16, Business Restructuring , for additional details.

Net interest expense for the second quarter of 2020 decreased $0.5 million , or 29 percent, from net interest expense for the same quarter of last year.

This decrease was primarily attributable to lower interest expenses resulting from scheduled debt repayments and the non-recurrence of two one-time events in the second quarter of 2019:

(a) the recognition of make-whole interest expense associated with the Company’s voluntary prepayment of its 5.88 percent Senior Notes, partially offset by (b) the recognition of interest income associated with a Brazilian VAT tax recovery.

The C ompany also recognized lower interest income in the second quarter of 2020 as a result of lower global interest rates.

Other, net was $4.4 million of income for the second quarter of 2020 compared to $0.2 million of income for the same period of 2019.

The Company recognized $4.0 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the second quarter of 2020 compared to $0.8 million of income in last year’s second quarter.

In addition, the Company reported foreign exchange gains of $0.4 million in the second quarter of 2020 versus $0.6 million of foreign exchange losses in the second quarter of 2019.

The Company also reported $0.1 million of higher net periodic pension cost expense in the second quarter of 2020 versus the prior year quarter.

The Company’s effective tax rate was 25.0 percent for the second quarter of 2020 compared to 23.6 percent for the second quarter of 2019.

Net interest expense for the third quarter of 2020 increased $0.2 million, or 16 percent, versus the prior year quarter.

This increase was primarily attributable to lower interest income in the third quarter of 2020 as a result of lower global interest rates partially offset by lower interest expenses resulting from scheduled debt repayments.

Other, net was $2.6 million of income for the third quarter of 2020 compared to $0.9 million of income for the same period of 2019.

The Company recognized $2.2 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the third quarter of 2020 compared to $0.2 million of losses in last year’s third quarter.

In addition, the Company reported foreign exchange gains of $0.5 million in the third quarter of 2020 versus $0.4 million of foreign exchange gains in the third quarter of 2019.

The Company also reported $0.2 million of higher net periodic pension cost expense in the third quarter of 2020 versus the prior year quarter.

In addition, in the third quarter of 2019 the Company reported a $0.6 million gain on the sale of an asset that did not recur in the third quarter of 2020.

The Company’s effective tax rate was 23.2 percent for the third quarter of 2020 compared to 5.7 percent for the third quarter of 2019.

The increase was primarily attributable to:

(a) a less favorable projected geographical mix of income in the second quarter of 2020 versus 2019, and (b) a higher U.S.

tax impact on foreign earnings and profits in the second quarter of 2020 versus 2019.

Segment Results

(a) the non-recurrence of a favorable tax benefit recognized in the third quarter of 2019 on incremental U.S.

tax credits identified as part of a research and development tax credit study, and;

(b) a less favorable geographical mix of income in the third quarter of 2020 versus the third quarter of 2019.

Segment Res ults

For the Three Months Ended

(Dollars in thousands)

September 30,

Specialty Products

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(Dollars in thousands)

September 30,

Operating Income

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Total Operating Income

Surfactants net sales for the second quarter of 2020 increased $19.0 million, or six percent, versus net sales for the second quarter of 2019.

A 10 percent increase in sales volume and higher average selling prices positively impacted the change in net sales by $30.2 million and $6.0 million, respectively.

Surfactant net sales for the third quarter of 2020 increased $34.1 million, or 11 percent, versus net sales for the third quarter of 2019.

An eight percent increase in sales volume and higher average selling prices positively impacted the change in net sales by $23.7 million and $21.0 million, respectively.

The unfavorable impact of foreign currency translation negatively impacted the change in net sales by $10.6 million.

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(Dollars in thousands)

September 30,

North America

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Total Surfactants Segment

Net sales for North American operations increased $15.9 million, or eight percent, between quarters.

A seven percent increase in sales volume and higher average selling prices positively impacted the change in net sales by $14.1 million and $2.1 million, respectively.

The sales volume growth was primarily due to higher demand for products sold into the consumer product end markets, driven by increased demand for cleaning, disinfection and personal wash products as a result of COVID-19, partially offset by lower demand in the functional product end markets, principally agricultural and oilfield.

Net sales for North American operations increased $23.3 million, or 13 percent, between quarters.

An 11 percent increase in sales volume and higher average selling prices positively impacted the change in net sales by $18.9 million and $4.5 million, respectively.

Higher customer demand in the agricultural market also contributed to this increase.

This growth was partially offset by lower demand in the oilfield market.

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

Net sales for European operations increased $1.5 million, or three percent, between quarters.

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

The unfavorable impact of foreign currency translation and a one percent decline in sales volume negatively impacted the change in net sales by $1.5 million and $0.4 million, respectively.

The lower sales volume reflects lost business at one customer mostly offset by increased demand for cleaning and disinfection products as a result of COVID-19 and higher demand for products sold into the agricultural end market.

A stronger U.S.

Net sales for European operations decreased $0.7 million, or one percent, between quarters.

A 10 percent decrease in sales volume negatively impacted the change in net sales by $5.6 million.

The lower sales volume reflects lost business at one customer partially offset by increased demand for cleaning and disinfection products as a result of COVID-19.

Higher average selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $2.1 million and $2.8 million, respectively.

A weaker U.S.

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

Net sales for Latin American operations increased $2.2 million, or four percent, primarily due to a 28 percent increase in sales volume and higher average selling prices.

Net sales for Latin American operations increased $8.5 million, or 16 percent, primarily due to higher average selling prices and a 13 percent increase in sales volume.

These items positively impacted the change in net sales by $15.9 million and $6.6 million, respectively.

The sales volume growth was mostly due to higher demand for products sold into the consumer product end markets, driven by increased demand for cleaning and disinfection products, and a fully operational Ecatepec, Mexico facility in 2020.

Foreign currency translation negatively impacted the change in net sales by $15.7 million.

The sales volume growth was mostly due to higher demand for products sold into the consumer product end markets,

driven by increased demand for cleaning products, and a fully operational Ecatepec, Mexico facility in 2020.

Foreign currency translation negatively impacted the change in net sale s by $14.0 million.

The strengthening of the U.S.

dollar against the Brazilian real, Mexican peso and the Colombian peso led to the foreign currency translation impact.

Net sales for Asian operations declined $0.6 million, or four percent, primarily due to lower average selling prices and a one percent decline in sales volume.

These items unfavorably impacted the change in net sales by $0.8 million and $0.1 million, respectively.

The slightly lower sales volume was due to lower demand for products sold to one consumer products customer partially offset by higher demand for products sold into the agricultural end market.

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

Surfactants operating income for the second quarter of 2020 increased $16.4 million, or 51 percent, versus operating income for the second quarter of 2019.

Gross profit increased $15.8 million in the second quarter of 2020 versus the second quarter of 2019 and operating expenses decreased $0.6 million, or three percent.

Net sales for Asian operations increased $3.1 million, or 26 percent, primarily due to a 20 percent increase in sales volume and the favorable impact of foreign currency translation.

These items favorably impacted the change in net sales by $2.4 million and $0.8 million, respectively.

The sales volume growth was mostly due to higher demand for products sold into the commodity consumer product end markets, driven by increased demand for cleaning products.

Lower average selling prices negatively impacted the change in net sales by $0.1 million.

Surfactant operating income for the third quarter of 2020 increased $21.5 million, or 109 percent, versus operating income for the third quarter of 2019.

Gross profit increased $21.4 million in the third quarter of 2020 versus the third quarter of 2019 and operating expenses decreased $0.1 million, or one percent.

The third quarter 2020 results were favorably impacted by a $2.2 million partial insurance recovery related to the first quarter 2020 Millsdale, IL plant power outage.

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

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(Dollars in thousands)

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

Gross Profit and Operating Income

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Surfactants Segment Operating Income

Gross profit for North American operations increased 18 percent, or $7.1 million, between quarters primarily due to higher unit margins and a seven percent increase in sales volume.

Gross profit for North American operations increased 56 percent, or $14.5 million, between quarters primarily due to higher unit margins and an 11 percent increase in sales volume.

These items positively impacted the change in gross profit by $11.8 million and $2.7 million, respectively.

The higher unit margins reflect a more favorable product and customer mix.

The higher unit margins reflect a more favorable product and customer mix as well as a $2.2 million partial insurance recovery related to the first quarter 2020 Millsdale, IL plant power outage.

Most of the sales volume increase was attributable to increased demand for cleaning, disinfection and personal wash products as a result of COVID-19.

Gross profit for European operations increased $2.0 million, or 27 percent, primarily due to higher unit margins.

These higher unit margins positively impacted the change in gross profit by $2.3 million.

The higher unit margins were attributable to a mor e favorable product and customer mix in the second quarter of 2020 primarily resulting from higher demand in the agricultural end market and lower demand for commodity softeners.

The unfavorable impact of foreign currency translation and a one percent dec line in sales volume negatively impacted the change in gross profit by $0.2 million and $0.1 million, respectively.

Gross profit for European operations increased $0.3 million, or three percent, primarily due to higher unit margins and the favorable impact of foreign currency translation.

These items positively impacted the change in gross profit by $0.7 million and $0.4 million, respectively.

The higher unit margins were attributable to a more favorable product and customer mix in the third quarter of 2020 primarily resulting from higher demand for biocidal quaternaries and lower demand for commodity softeners.

A 10 percent decline in sales volume negatively impacted the change in gross profit by $0.8 million.

Gross profit for Latin American operations increased $8.3 million, or 169 percent, between quarters primarily due to higher unit margins.

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The unfavorable impact of foreign currency translation negatively impacted gross profit by $3.4 million.

Gross profit for Asia operations increased $0.7 million or 21 percent, between quarters largely due to higher unit margins.

The higher unit margins were driven by an improved product and customer mix resulting from higher sales volume into the agricultural end market and lower unit overhead costs in Singapore due to favorable production timing differences.

Operating expenses for the Surfactants segment decreased $0.6 million, or three percent, in the second quarter of 2020 versus the second quarter of 2019.

Polymers net sales for the second quarter of 2020 decreased $28.2 million, or 20 percent, versus net sales for the same period of 2019.

A 13 percent decline in sales volume negatively impacted the change in net sales by $18.2 million.

The volume decrease is primarily attributable to an eight percent decline in global polyol volume, due to COVID-19 construction project delays and cancellations, and a 41 percent decline in phthalic anhydride volume.

The unfavorable impact of lower average selling prices and foreign currency translation negatively impacted the change in net sales by $7.1 million and $2.9 million, respectively.

Gross profit for Asian operations decreased $1.8 million or 38 percent, between quarters largely due to lower unit margins.

The lower unit margins negatively impacted the change in gross profit by $2.8 million and were largely driven by higher demand for products sold into the commodity consumer product end markets.

The lower unit margins were partially offset by a 20 percent increase in sales volume and the favorable impact of foreign currency translation.

These items positively impacted the change in gross profit by $0.9 million and $0.1 million, respectively.

Operating expenses for the Surfactant segment decreased $0.1 million, or one percent, in the third quarter of 2020 versus the third quarter of 2019.

Polymer net sales for the third quarter of 2020 decreased $18.4 million, or 14 percent, versus net sales for the same period of 2019.

A five percent decline in sales volume negatively impacted the change in net sales by $7.3 million.

The sales volume decrease was primarily attributable to an eight percent decline in demand for North American rigid polyols and a 25 percent decline in phthalic anhydride volume.

The lower North American rigid polyols demand continues to reflect COVID-19 related construction project delays and cancellations.

European sales volume improved three percent during the quarter.

The unfavorable impact of lower average selling prices negatively impacted the change in net sales by $11.9 million.

Foreign currency translation positively impacted the change in net sales by $0.8 million.

A comparison of net sales by region follows:

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(Dollars in thousands)

September 30,

North America

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The decline in sales volume negatively impacted the change in net sales by $8.5 million.

Sales volume of polyols used in rigid foam applications decreased five percent during the quarter due to COVID-19 construction project delays and cancellations.

Sales volume of polyols used in rigid foam applications decreased eight percent during the quarter due to COVID-19 related construction project delays and cancellations.

Sales volume of phthalic anhydride decreased 25 percent due to share loss at one customer and soft market demand.

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The lower selling prices reflect lower raw material market prices.

Net sales for European operations declined $11.4 million or 26 percent.

A 19 percent decrease in sales volume, the unfavorable impact of foreign currency translation and lower average selling prices negatively impacted the change in net sales by $8.2 million, $2.4 million and $0.8 million, respectively.

The decline in sales volume principally reflects softer demand due to deferred or canceled construction projects as a result of COVID-19.

The lower selling prices reflect lower raw material prices.

Net sales for Asia and Other operations increased $0.8 million, or eight percent, primarily due to a 35 percent increase in sales volume.

The sales volume growth, which positively impacted the change in net sales by $3.5 million, was primarily attributable to higher demand in livestock and cold storage markets.

Lower selling prices and the unfavorable impact of foreign currency translation negatively impacted the change in net sales by $2.1 million and $0.6 million, respectively.

The lower selling prices reflect lower raw material prices.

Polymers operating income for the second quarter of 2020 decreased $7.2 million, or 32 percent, from operating income for the second quarter of 2019.

Gross profit decreased $7.4 million, or 25 percent, primarily due to the 13 percent decline in sales volume and lower unit margins.

The lower unit margins reflect higher North American supply chain costs and the carryover of higher cost raw material inventory as a result of the first quarter 2020 incident at the Company’s Millsdale, IL site.

The second quarter of 2020 results were favorably impacted by a partial government reimbursement related to the government-mandated China JV shutdown in

2012 ($1.1 million) and a European vendor claim settlement related to a prior year raw material contamin ation issue ($0.5 million).

Operating expenses declined $0.2 million.

Net sales for European operations declined $1.5 million or four percent.

A three percent improvement in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $1.1 million and $0.9 million, respectively.

Lower average selling prices negatively impacted the change in net sales by $3.5 million.

The lower average selling prices reflect lower raw material costs that were passed through to customers.

Net sales for Asian and Other operations decreased $1.1 million, or 10 percent due to a five percent decline in sales volume, lower average selling prices and the unfavorable impact of foreign currency translation.

The lower sales volume reflects unplanned production issues during the third quarter of 2020.

These items negatively impacted the change in net sales by $0.6 million, $0.4 million and $0.1 million, respectively.

Polymers operating income for the third quarter of 2020 decreased $0.9 million, or four percent, from operating income for the third quarter of 2019.

Gross profit decreased $0.8 million, or three percent mainly due to a five percent decline in sales volume.

The third quarter 2020 results were favorably impacted by a $2.8 million partial insurance recovery related to the first quarter 2020 Millsdale, IL plant power outage and a $1.2 million partial government reimbursement related to the government-mandated China JV shutdown in 2012.

Operating expenses increased $0.1 million, or two percent, during the third quarter of 2020.

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

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(Dollars in thousands)

June 30, 2020

June 30, 2019

September 30,

Gross Profit and Operating Income

4 unchanged sentences

Polymers Segment Operating Income

Gross profit for North American operations decreased $9.0 million, or 41 percent, primarily due to lower unit margins and the 15 percent decline in sales volume.

Gross profit for North American operations decreased $2.4 million, or 11 percent, primarily due to a 10 percent decline in sales volume and lower unit margins.

These two items negatively impacted the change in gross profit by $2.1 million and $0.3 million respectively.

The lower unit margins primarily reflect higher supply chain costs and the carryover of higher cost raw material inventory as a result of the first quarter 2020 incident at the Company’s Millsdale, IL facility.

Gross profit for European operations decreased $0.2 million, or three percent, primarily due to a 19 percent decrease in sales volume and the unfavorable impact of foreign currency translation.

These items negatively impacted the change in gross profit by $1.2 million and $0.4 million, respectively.

The decline in sales volume primarily reflects lower demand for polyols used in rigid foam applications due to deferred or cancelled construction projects as a result of COVID-19.

Higher unit margins positively impacted the change in gross profit by $1.4 million.

The higher unit margins were partially attributable to a vendor claim settlement recognized in the second quarter of 2020 related to a prior year raw material contamination issue ($0.5 million).

Gross profit for Asia and Other operations improved $1.7 million due to higher unit margins and sales volume growth of 35 percent.

The lower unit margins partially reflect incremental raw material sourcing costs due to the Illinois River lock closures that have disrupted normal barge activity.

During the third quarter of 2020 the Company recognized $2.8 million partial insurance recovery related to the first quarter 2020 Millsdale, IL plant power outage which positively impacted unit margins in the quarter.

Gross profit for European oper ations increased $1.3 million, or 20 percent, due to improved unit margins, a three percent increase in sales volume and the favorable impact of foreign currency translation.

These items positively impacted the change in gross profit by $0.9 million, $0.2 million and $0.2 million, respectively.

Gross profit for Asian and Other operations improved $0.4 million due to higher unit margins.

Unit margins benefited from a partial government reimbursement related to the government-mandated China JV shutdown in 2012 ($1.2 million).

Operating expenses for the Polymers segment decreased $0.2 million, or three percent, in the second quarter of 2020 versus the second quarter of 2019.

Unit margins were negatively impacted by unplanned production issues which resulted in higher outsourcing costs.

Sales volume decreased five percent which negatively impacted the change in gross profit by $0.1 million.

Operating expenses for the Polymers segment increased $0.1 million, or two percent, in the third quarter of 2020 versus the third quarter of 2019.

Specialty Products

Net sales for the second quarter of 2020 decreased $3.2 million, or 17 percent, versus net sales for the second quarter of 2019.

Net sales for the third quarter of 2020 decreased $2.8 million, or 17 percent, versus net sales for the third quarter of 2019.

This decrease reflects lower average selling prices as volume was flat.

Gross profit decreased $2.7 million and operating income decreased $2.8 million primarily due to lower average margins within the Company’s medium chain triglycerides product line and order timing differences within the food and flavor business.

Gross profit decreased $0.6 million and operating income decreased $0.7 million primarily due to lower average margins within the Company’s medium chain triglycerides product line and customer order patterns within the Company’s food and flavor business.

Corporate Expenses

Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, increased $5.5 million between quarters.

Corporate expenses were $22.6 million in the second quarter of 2020 versus $19.8 million in 2019.

This increase was primarily attributable to higher deferred compensation expense ($4.1 million) that was partially offset by lower environmental remediation and business restructuring expenses in the second quarter of 2020.

The $4.1 million increase in deferred compensation expense was primarily due to an $8.64 per share increase in the market price of Company common stock in the second quarter of 2020 compared to a $4.39 per share increase for the second quarter of 2019.

The following table presents the quarter-end Company common stock market prices used in the computation of deferred compensation expenses for the three months ended June 30, 2020 and 2019:

Corporate expenses were $22.7 million in the third quarter of 2020 versus $17.2 million in 2019.

This increase was primarily attributable to higher deferred compensation expense ($4.0 million), higher incentive-based compensation expenses and higher consulting fees in the third quarter of 2020 versus the third quarter of 2019.

These items were partially offset by lower restructuring expenses in the third quarter of 2020.

The $4.0 million increase in deferred compensation expense was primarily due to an $11.9 per share increase in the market price of Company common stock in the third quarter of 2020 compared to a $5.15 per share increase in the third quarter of 2019.

The following table presents the quarter-end Company common stock market prices used in the computation of deferred compensation expenses for the three months ended September 30, 2020 and 2019:

Company Common Stock Price

Six Months Ended June 30, 2020 and 2019

Net income attributable to the Company for the first half of 2020 increased 15 percent to $63.3 million, or $2.72 per diluted share, from $55.2 million, or $2.37 per diluted share, in the first half of 2019.

Nine Months Ended September 30, 2020 and 2019

Net income attributable to the Company for the first nine months of 2020 increased 19 percent to $96.4 million, or $4.15 per diluted share, from $81.1 million, or $3.48 per diluted share, in the first nine months of 2019.

Adjusted net income was $98.9 million, or $4.25 per diluted share, versus $93.7 million or $4.02 per diluted share, in the prior year.

(see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for reconciliations between reported net income attributable to the Company and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).

Below is a summary discussion of the major factors leading to the year-over-year changes in net sales, profits and expenses.

A detailed discussion of segment operating performance for the first half of 2020 compared to the first half of 2019 follows the summary.

Consolidated net sales decreased $51.6 million, or five percent, between years.

Lower average selling prices and the unfavorable impact of foreign currency translation negatively impacted the change in net sales by $29.3 million and $28.5 million, respectively.

Consolidated sales volume increased one percent which had a $6.2 million favorable impact on the year-over-year change in net sales.

The decrease in average selling prices was primarily due to the pass through of lower raw material costs.

Below is a summary discussion of the major factors leading to the year-over-year changes in net sales, expenses and income.

A detailed discussion of segment operating performance for the first nine months of 2020 compared to the first nine months of 2019 follows the summary.

Consolidated net sales decreased $38.7 million, or three percent, between years.

The unfavorable impact of foreign currency translation and lower average selling prices negatively impacted the change in net sales by $38.2 million and $27.8 million, respectively.

Consolidated sales volume increased two percent which had a $27.3 million favorable impact on the year-over-year change in net sales.

The unfavorable foreign currency translation effect reflected a stronger U.S.

dollar against most currencies where the Company has foreign operations.

Sales volume in the Surfactant segment increased four percent while sales volume in the Polymer and Specialty Product segments decreased 11 percent and four percent, respectively.

Operating income for the first half of 2020 increased $13.8 million, or 20 percent, versus operating income reported for the first half of 2019.

Surfactant operating income increased $15.4 million or 22 percent versus the first half of 2019.

The decrease in average selling prices was primarily due to the pass through of lower raw material costs.

Sales volume in the Surfactant segment increased five percent while sales volume in the Polymer and Specialty Product segments decreased nine percent and three percent, respectively.

Operating income for the first nine months of 2020 increased $28.3 million, or 29 percent, versus operating income reported for the first nine months of 2019.

Surfactant operating income increased $36.9 million or 41 percent versus the first nine months of 2019.

Polymer and Specialty Products operating income decreased $12.7 million and $2.6 million, respectively.

Deferred compensation expenses decreased $10.7 million year-over-year.

Corporate expenses (excluding deferred compensation and business restructuring expenses) decreased $0.8 million between years largely due to lower environmental remediation expenses.

Business restructuring expenses decreased $0.6 million between years.

Deferred compensation expenses and business restructuring expenses decreased $6.7 million and $0.9 million, respectively.

Corporate expenses (excluding

deferred compensation and business restructuring expenses) increased $1.0 million between years.

Foreign currency translation had a $6 .3 million unfavorable impact on year-over-year consolidated operating income.

Operating expenses (including deferred compensation and business restructuring expenses) decreased $13.6 million, or 13 percent, between years.

Operating expenses (including deferred compensation and business restructuring expenses) decreased $8.4 million, or five percent, between years.

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

Selling expenses decreased $1.7 million, or six percent, year-over-year partially due to lower travel and entertainment expenses as a result of COVID-19 restrictions.

Administrative expenses decreased $1.2 million, or three percent, year-over-year primarily due to lower environmental remediation expenses in 2020.

R&D expenses increased $0.6 million, or two percent, year-over-year.

Deferred compensation expense decreased $10.7 million year-over-year primarily due to a $5.34 per share decrease in the market price of Company common stock during the first six months of 2020 compared to a $17.91 per share increase in the first half of 2019.

Selling expenses decreased $2.6 million, or six percent, year-over-year largely due to lower travel and entertainment expenses as a result of COVID-19 restrictions.

Administrative expenses increased $0.4 million, or one percent, year-over-year primarily due to higher incentive-based compensation expenses and consulting fees in 2020 that were mostly offset by non-recurring environmental remediation expenses recognized in 2019.

R&D expenses increased $1.4 million, or four percent, year-over-year mainly due to higher salaries and incentive-based compensation expenses.

Deferred compensation expense decreased $6.7 million year-over-year primarily due to a $6.56 per share increase in the market price of Company common stock during the first nine months of 2020 compared to a $23.06 per share increase in the first nine months of 2019.

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

Business restructuring expenses were $0.6 million in the first half of 2020 compared to $1.2 million in the first half of 2019.

Business restructuring expenses were $0.7 million in the first nine months of 2020 compared to $1.6 million in the first nine months of 2019.

The 2020 restructuring charges were comprised of ongoing decommissioning costs associated with the 2016 Canadian plant closure ($0.6 million) and decommissioning costs associated with the Company’s 2018 sulfonation shut down in Germany ($0.1 million).

1 unchanged sentence

(see Note 16, Business Restructuring , for additional details).

Net interest expense for the first half of 2020 declined $1.1 million, or 31 percent, compared to net interest expense for the first half of 2019.

This decrease was primarily attributable to lower interest expense resulting from scheduled debt repayments and the non-recurrence of two one-time events in the first half of 2019:

Net interest expense for the first nine months of 2020 declined $0.9 million, or 18 percent, compared to net interest expense for the first nine months of 2019.

This decrease was primarily attributable to lower interest expense resulting from scheduled debt repayments and also the non-recurrence of two one-time events in the first nine months of 2019:

The Company also recognized lower interest income in the first half of 2020 as a result of lower global interest rates.

Other, net was $1.2 million of income for the first half of 2020 compared to $3.4 million of income for the first half of 2019.

The Company recognized $0.2 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the first half of 2020 compared to $3.3 million of

income in the first half of 2019.

In addition, the Company reported foreign exchange gains of $1.0 million in the first half of 2020 versus a negligible foreign exchange loss in in the first half of 2019.

The Company also reported $0.1 million of higher net periodic pension cost expense in the first h alf of 2020 versus the prior year.

The Company’s effective tax rate was 23.9 percent for the first half of 2020 compared to 21.8 percent for the first half of 2019.

The Company also recognized lower interest income in the first nine months of 2020 as a result of lower global interest rates.

Other, net was $3.8 million of income for the first nine months of 2020 compared to $4.3 million of income for the first nine months of 2019.

The Company recognized $2.5 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the first nine months of 2020 compared to $3.1 million of income in the first nine months of 2019.

In addition, the Company reported foreign exchange gains of $1.5 million in the first nine months of 2020 versus $0.3 million of foreign exchange gains in in the first nine months of 2019.

The Company also reported $0.4 million of higher net periodic pension cost expense in the first nine months of 2020 versus the prior year.

In 2019, the Company recognized a $0.6 million gain on the sale of an asset that did not recur in 2020.

The Company’s effective tax rate was 23.7 percent for the first nine months of 2020 compared to 17.3 percent for the first nine months of 2019.

The year-over-year increase was primarily attributable to:

(a) lower excess tax benefits derived from stock-based compensation awards exercised or distributed in the first half of 2020 versus 2019;

(b) a higher U.S.

tax impact on foreign earnings and profits in the first half of 2020, and (c) a less favorable geographical mix of income in the first half of 2020 versus 2019.

For the Six Months Ended

(a) the non-recurrence of a favorable tax benefit recognized in the third quarter of 2019 on incremental U.S.

tax credits identified as part of a research and development tax credit study;

(b) a less favorable geographical mix of income in the first nine months of 2020 versus the first nine months of 2019, and;

(c) lower excess tax benefits derived from stock-based compensation awards exercised or distributed in the first nine months of 2020 versus the first nine months of 2019.

For the Nine Months Ended

(In thousands)

September 30,

Specialty Products

Total Net Sales

For the Six Months Ended

For the Nine Months Ended

(In thousands)

September 30,

Operating Income

7 unchanged sentences

Segment Results

Surfactants net sales for the first half of 2019 decreased $3.6 million, or one percent, versus net sales for the first half of 2019.

A four percent increase in sales volume positively impacted the year-over-year change in net sales by $27.5 million.

The unfavorable impact of foreign currency translation and lower selling prices negatively impacted the year-over-year change in net sales by $23.7 million and $7.4 million, respectively.

Surfactant net sales for the first nine months of 2020 increased $30.5 million, or three percent, versus net sales for the first nine months of 2019.

A five percent increase in sales volume and higher selling prices positively impacted the year-over-year change in net sales by $51.8 million and $13.0 million, respectively.

The unfavorable impact of foreign currency translation negatively impacted the year-over-year change in net sales by $34.3 million.

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

For the Six Months Ended

For the Nine Months Ended

(In thousands)

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

North America

1 unchanged sentence

Total Surfactants Segment

Net sales for North American operations increased $9.5 million, or two percent, year-over-year.

A four percent increase in sales volume positively impacted the year-over-year change in net sales by $16.9 million.

Net sales for North American operations increased $32.8 million, or six percent, year-over-year.

A six percent increase in sales volume positively impacted the year-over-year change in net sales by $36.3 million.

Lower average selling prices and the unfavorable impact of foreign currency translation negatively impacted the year-over-year change in net sales by $3.0 million and $0.5 million, respectively.

Net sales for European operations decreased $10.4 million, or eight percent, primarily due to an eight percent decrease in sales volume and the unfavorable effects of foreign currency translation.

Net sales for European operations decreased $11.1 million, or six percent, primarily due to an eight percent decrease in sales volume and the unfavorable effects of foreign currency translation.

These items negatively impacted the year-over-year change in net sales by $15.5 million and $0.3 million, respectively.

The lower sales volume reflects lost business at one customer that was partially offset by increased demand for cleaning and disinfection products as a result of COVID-19 and higher demand for p roducts sold into the agricultural end market.

A stronger U.S.

1 unchanged sentence

Higher selling prices favorably impacted the year-over-year change in net sales by $4.7 million.

Net sales for Latin American operations decreased $2.1 million, or two percent, primarily due to the unfavorable impact of foreign currency translation which negatively impacted the year-over-year change in net sales by $20.9 million.

Net sales for Latin American operations increased $6.4 million, or four percent, primarily due to a 15 percent increase in sales volume and higher selling prices.

These items positively impact the change in net sales by $23.9 million and $17.4 million, respectively.

The sales volume growth was driven by higher demand for products sold into the consumer product end markets, driven by increased demand for cleaning products, and a fully operational Ecatepec, Mexico facility in 2020.

Partially offsetting the above was the unfavorable impact of foreign currency translation which negatively impact the change in net sales by $34.9 million.

The year-over-year strengthening of the U.S.

dollar against the Brazilian real, Mexican peso and the Colombian peso led to the foreign currency effect.

Largely offsetting the foreign currency translation impact was sales volume growth of 17 percent and slightly higher average selling prices.

These items positively impacted the change in net sales by $17.4 million and $1.4 million, respectively.

The sales volume growth was driven by higher demand for products sold into the consumer products end markets, driven by increased demand for cleaning and disinfection products, and a fully operational Ecatepec, Mexico facility in 2020.

Net sales for Asian operations decreased $0.7 million, or three percent, primarily due to lower average selling prices and a two percent decline in sales volume.

These items unfavorably impacted the year-over-year change in net sales by $0.8 million and $0.5 million, respectively.

The lower sales volume was largely due to lower demand for products sold to our distribution partners partially offset by higher demand for products sold to the agricultural end market.

The favorable impact of foreign currency translation positively impacted the change in net sales by $0.6 million.

Surfactant operating income for the first half of 2020 increased $15.4 million, or 22 percent, versus operating income for the first half of 2019.

Net sales for Asian operations increased $2.4 million, or six percent, primarily due to a five percent increase in sales volume and the favorable impact of foreign currency translation.

These items favorably impacted the year-over-year change in net sales by $1.9

million and $1.4 million, respectively.

The sales volume growth was mostly due to higher demand for products sold into the commodity consum er product end markets, driven by increased demand for cleaning products, and higher demand for products sold to the agricultural end market.

A weaker U.S.

dollar relative to the Philippine peso led to the foreign currency translation effect.

Lower avera ge selling prices negatively impacted the change in net sales by $0.9 million.

Surfactant operating income for the first nine months of 2020 increased $36.9 million, or 41 percent, versus operating income for the first nine months of 2019.

Gross profit increased $36.0 million, or 22 percent, year-over-year.

Operating expenses decreased $0.7 million, or two percent.

Operating expenses decreased $0.9 million, or one percent.

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

For the Six Months Ended

For the Nine Months Ended

(In thousands)

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

North America

3 unchanged sentences

Operating Income

Gross profit for North American operations increased $5.2 million, or six percent, year-over-year primarily due to the four percent increase in sales volume and higher unit margins.

Gross profit for North American operations increased $19.7 million, or 18 percent, year-over-year primarily due to higher unit margins and a six percent increase in sales volume.

These items positively impacted the change in gross profit by $13.0 million and $6.7 million, respectively.

Most of the sales volume increase was attributable to increased demand for cleaning, disinfection and personal wash products as a result of COVID-19.

The higher unit margins reflect a more favorable product and customer mix.

Gross profit for European operations increased $1.0 million, or six percent, primarily due to higher unit margins.

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

Partially offsetting the above, unit margins were negatively impacted by higher maintenance, supply chain costs and unit overhead rates incurred as a result of the first quarter 2020 power outage at the Company’s Millsdale, IL site.

North American operations benefited from a $2.2 million partial insurance recovery received in the third quarter of 2020 related to the Millsdale incident.

Gross profit for European operations increased $1.3 million, or five percent, primarily due to higher unit margins.

These higher unit margins positively impacted the year-over-year change in gross profit by $3.6 million.

The higher unit margins were attributable to a more favorable product and customer mix in the first half of 2020 primarily resulting from higher demand in the agricultural end market and lower demand for commodity softeners.

The higher unit margins were attributable to a more favorable product and customer mix in the first nine months of 2020 primarily resulting from higher demand for biocidal quaternaries and products sold into the agricultural end market combined with lower demand for commodity softeners.

An eight percent decline in sales volume and the unfavorable impact of foreign currency translation negatively impacted the year-over-year change in gross profit by $2.2 million and $0.1 million, respectively.

The decline in sales volume primarily reflects lost business at one customer.

Gross profit for Latin American operations increased $9.5 million, or 97 percent, primarily due to higher unit margins and sales volume growth of 17 percent.

Gross profit for Latin American operations increased $17.9 million, or 121 percent, primarily due to higher unit margins and a 15 percent increase in sales volume.

These items positively impacted the change in gross profit by $23.6 million and $2.2 million, respectively.

2 unchanged sentences

The unfavorable impact of foreign currency translation negatively impacted gross profit by $7.9 million.

Gross profit for Asian operations decreased $1.1 million, or 15 percent, largely due to lower unit margins and lower sales volume.

These items negatively impacted f irst half gross profit by $1.0 million and $0.2 million, respectively.

The lower unit margins partially reflect higher unit overhead costs in Singapore due to unfavorable production timing differences.

The favorable impact of foreign currency translation positively impacted gross profit by $0.1 million.

Operating expenses for the Surfactant segment decreased $0.7 million, or two percent, year-over-year.

Polymers net sales for the first half of 2020 decreased $41.9 million, or 16 percent, versus net sales for the same period of 2019.

An 11 percent decrease in sales volume negatively impacted the year over year change in net sales by $28.2 million.

Gross profit for Asian operations decreased $2.8 million, or 24 percent, largely due to lower unit margins which negatively impacted the change in gross profit by $3.6 million.

These lower unit margins partially reflect higher unit overhead costs in Singapore due to unfavorable production timing differences.

A five percent increase in sales volume and the favorable impact of foreign currency translation positively impacted gross profit by $0.6 million and $0.2 million, respectively.

Operating expenses for the Surfactant segment decreased $0.9 million, or one percent, year-over-year.

Polymer net sales for the first nine months of 2020 decreased $60.3 million, or 15 percent, versus net sales for the same period of 2019.

A nine percent decrease in sales volume negatively impacted the year over year change in net sales by $35.4 million.

The unfavorable impact of lower average selling prices and foreign currency translation negatively impacted the year-over-year change in net sales by $21.1 million and $3.8 million, respectively.

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

For the Six Months Ended

For the Nine Months Ended

(Dollars in thousands)

September 30,

North America

3 unchanged sentences

The decline in sales volume negatively impacted the year-over-year change in net sales by $31.7 million.

Sales volume of polyols used in rigid foam applications decreased one percent during the first half of 2020 due to COVID-19 related construction project delays and cancellations.

Sales volume of phthalic anhydride decreased 51 percent due to share loss at one customer and soft market demand.

Sales volume of polyols used in rigid foam applications decreased four percent during the first nine months of 2020 due to COVID-19 related construction project delays and cancellations.

Sales volume of phthalic anhydride decreased 43 percent due to volume lost as a result of the first quarter 2020 Millsdale, IL power outage, share loss at one customer and soft market demand.

Lower average selling prices negatively impacted the change in net sales by $11.2 million.

1 unchanged sentence

Net sales for European operations decreased $18.5 million, or 15 percent.

A 12 percent decrease in sales volume, the unfavorable impact of foreign currency translation and lower average selling prices negatively impacted the year-over-year change in net sales by $10.5 million, $3.6 million and $2.8 million, respectively.

The decline in sales volume principally reflects softer demand due to deferred and canceled construction projects as a result of COVID-19.

A seven percent decrease in sales volume, lower average selling prices and the unfavorable impact of foreign currency translation negatively impacted the year-over-year change in net sales by $9.2 million, $6.6 million and $2.7 million, respectively.

The decline in sales volume principally reflects softer demand due to deferred and canceled construction projects as a result of COVID-19 during the first half of 2020.

A stronger U.S.

1 unchanged sentence

The lower average selling prices reflect lower raw material prices.

Net sales for Asia and Other operations increased $2.2 million, or 13 percent, primarily due a 28 percent increase in sales volume.

Net sales for Asian and Other operations increased $1.0 million, or four percent, primarily due a 14 percent increase in sales volume.

The sales volume growth, which positively impacted the change in net sales by $3.8 million, was primarily attributable to higher demand in livestock and cold storage markets.

1 unchanged sentence

The lower average selling prices reflect lower raw material prices.

Polymer operating income for the first half of 2020 declined $11.8 million, or 34 percent, from operating income for the first half of 2019.

Gross profit decreased $12.1 million, or 25 percent, primarily due to the 11 percent decline in sales volume.

The first half 2020 results were favorably impacted by a partial government reimbursement related to the government-mandated China JV shutdown in 2012 ($1.1 million) and a European vendor claim settlement related to a prior year raw material contamination issue ($0.5 million).

Operating expenses decreased two percent year-over-year.

Polymer operating income for the first nine months of 2020 declined $12.7 million, or 22 percent, from operating income for the first nine months of 2019.

Gross profit decreased $12.9 million, or 16 percent, primarily due to lower unit margins and a nine percent decline in sales volume.

The lower unit margins principally reflect higher maintenance, supply chain costs and unit overhead rates incurred as a result of the first quarter 2020 power outage at the Company’s Millsdale, IL site.

Unit margins were also negatively impacted by incremental raw material costs incurred as a result of the Illinois River lock closures.

These costs were partially offset by a $2.8 million partial insurance recovery received in the third quarter of 2020 related to the Millsdale power outage.

In addition, the 2020 nine-month results were favorably impacted by partial government reimbursement related to the government-mandated China JV shutdown in 2012 ($2.3 million).

Operating expenses decreased one percent year-over-year.

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

For the Six Months Ended

For the Nine Months Ended

(In thousands)

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

Gross Profit and Operating Income

4 unchanged sentences

Polymers Segment Operating Income

Gross profit for North American operations declined $14.2 million, or 41 percent, primarily due to lower unit margins and the 15 percent decline in sales volume.

These two ite ms negatively impacted the year-over-year change in gross profit by $9.1 million and $5.1 million, respectively.

The decline in margins was primarily attributable to the first quarter 2020 incident at the Company’s Millsdale, IL facility which forced a te mporary production shutdown and resulted in higher maintenance, supply chain costs and unit overhead rates.

In addition, higher cost raw material inventory carried over from the first quarter due to the Millsdale incident.

The decrease in sales volume prim arily reflects COVID -19 construction project delays and cancellations and soft phthalic anhydride market demand.

Gross profit for European operations declined $0.1 million, or one percent, primarily due to 12 percent decrease in sales volume ant the unfavorable impact of foreign currency translation.

These items negatively impacted the change in gross profit by $1.4 million and $0.6 million, respectively.

The decline in sales volume primarily reflects lower demand for polyols used in rigid foam applications due to deferred or cancelled construction projects as a result of COVID-19.

Largely offsetting the above were higher unit margins, which positively impacted the year-over-year change in gross profit by $1.9 million.

The higher unit margins partially reflect a vendor claim settlement during the second quarter of 2020 and the non-recurrence of a maintenance shutdown in Germany during the first quarter of 2019.

Gross profit for Asia and Other operations improved $2.2 million, or 95 percent, due to higher unit margins and 28 percent sales volume growth during the first half of 2020.

Gross profit for North American operations declined $16.6 million, or 30 percent, primarily due to lower unit margins and a 13 percent decline in sales volume.

These two items negatively impacted the year-over-year change in gross profit by $9.3 million and $7.3 million, respectively.

The decline in margins was primarily attributable to the first quarter 2020 power outage at the Company’s

Millsdale, IL facility which forced a temporary production shutdown and resulted in higher maintenance, supply chain costs and unit overhead rates.

In addition, incremental raw material costs were incurred in 2020 as a result of the Illinois River lock closures.

Partially offsetting the above was a $2.8 million partial insurance recovery in the third quarter of 2020 related to the Millsdale power outage.

The decrease in sales volume in the first nine months of 2020 primarily reflects lost phthalic anhydride volume due to the Millsdale power o utage and share loss at one customer combined with lower rigid polyols demand as a result of COVID-19 related construction project delays and cancellations.

Gross profit for European operations increased $1.2 million, or six percent, primarily due to higher unit margins.

The higher unit margins positively impacted the change in gross profit by $2.9 million.

The higher unit margins partially reflect the non-recurrence of a maintenance shutdown in Germany in 2019.

A seven percent decline in sales volume and the unfavorable impact of foreign currency translation negatively impacted the change in gross profit by $1.3 million and $0.4 million, respectively.

The decline in sales volume primarily reflects lower demand for polyols used in rigid foam applications due to deferred or cancelled construction projects as a result of COVID-19 during the first half of 2019.

Gross profit for Asian and Other operations improved $2.6 million, or 59 percent, due to higher unit margins and 14 percent sales volume growth during the first nine months of 2020.

These items positively impacted the year-over-year change in gross profit by $2.0 million and $0.6 million, respectively.

Unit margins benefited from a partial government reimbursement related to the government-mandated China JV shutdown in 2012 ($1.1 million).

Unit margins benefited from partial government reimbursement related to the government-mandated China JV shutdown in 2012 ($2.3 million).

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

Operating expenses for the Polymers segment decreased $0.3 million, or two percent, year-over-year.

Operating expenses for the Polymers segment decreased $0.2 million, or one percent, year-over-year.

Specialty Products

Net sales for the first half of 2020 declined $6.1 million, or 16 percent, versus net sales for the same period of 2019.

This decrease was primarily due to a four percent decrease in sales volume and lower average selling prices.

Gross profit and operating income both decreased $1.9 million year-over-year primarily due to order timing differences within the food and flavor business.

Net sales for the first nine months of 2020 declined $8.9 million, or 16 percent, versus net sales for the same period of 2019.

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

Gross profit and operating income decreased by $2.5 million and $2.6 million, respectively, year-over-year primarily due to lower margins within the Company’s medium chain triglycerides product line and customer order patterns within the food and flavor business.

Corporate Expenses

Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, decreased $6.7 million between years.

Corporate expenses were $30.3 million in the first half of 2020 versus $42.4 million in the first half of 2019.

This decrease was primarily attributable to lower deferred compensation expense ($10.7 million), lower business restructuring expenses ($0.6 million) and lower environmental remediation expenses.

Corporate expenses were $53.0 million in the first nine months of 2020 versus $59.7 million in the first nine months of 2019.

This decrease was primarily attributable to lower deferred compensation expense ($6.7 million), lower business restructuring expenses ($0.9 million) and lower environmental remediation expenses, partially offset by higher incentive-based compensation expenses and consulting fees.

Deferred compensation expense decreased $6.7 million between years.

This decrease was primarily due to a $5.34 per share decrease in the market price of the Company’s common stock in the first half of 2020 compared to a $17.91 per share increase in the first half of 2019.

The following table presents the period-end Company common stock market prices used in the computation of deferred compensation expenses for the six months ended June 30, 2020 and 2019:

This decrease was primarily due to a $6.56 per share increase in the market price of the Company’s common stock in the first nine months of 2020 compared to a $23.06 per share increase in the first nine months of 2019.

The following table presents the period-end Company common stock market prices used in the computation of deferred compensation expenses for the nine months ended September 30, 2020 and 2019:

Company Common Stock Price

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 2020, operating activities were a cash source of $58.5 million versus a source of $78.8 million for the comparable period in 2019.

For the nine months ended September 30, 2020, operating activities were a cash source of $141.7 million versus a source of $132.7 million for the comparable period in 2019.

For the current year period, investing cash outflows totaled $98.1 million versus a cash outflow of $68.5 million in the prior year period.

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Cash and cash equivalents decreased by $5.0 million compared to December 31, 2019, inclusive of a $3.9 million unfavorable foreign exchange rate impact.

At June 30, 2020, the Company’s cash and cash equivalents totaled $272.9 million.

money market funds, deposit accounts and a certificate of deposit totaled $93.2 million, $29.5 million and $45.0 million, respectively.

At September 30, 2020, the Company’s cash and cash equivalents totaled $310.4 million.

money market funds, demand deposit accounts and a certificate of deposit totaled $92.4 million, $61.8 million and $15.0 million, respectively.

The Company’s non-U.S.

subsidiaries held $105.2 million of cash outside the United States as of June 30, 2020.

subsidiaries held $141.2 million of cash outside the United States as of September 30, 2020.

Operating Activity

Net income increased by $15.7 million versus the comparable period in 2019.

Working capital was a cash use of $47.4 million during the first half of 2020 versus a use of $29.2 million for the comparable period in 2019.

Working capital was a cash use of $23.2 million during the first nine months of 2020 versus a use of $22.2 million for the comparable period in 2019.

Year-to-date accounts receivable were a use of $28.4 million compared to a use of $9.0 million for the comparable period in 2019.

Inventories were a use of $2.6 million in 2020 versus a source of $25.9 million in 2019.

Accounts payable and accrued liabilities were a use of $8.3 million in 2020 compared to a use of $33.9 million for the same period in 2019.

Working capital requirements were higher in the first half of 2020 compared to 2019 primarily due to the changes noted above.

The higher accounts receivables cash usage in 2020 was primarily due to higher sales volume within the consumer product end markets to support increased demand for cleaning, disinfection and personal wssh products as a result of COVID-19.

The current year’s increase in inventories cash usage versus 2019 reflects a build-up of raw material inventories in 2020 versus a reduction of raw material inventories in 2019.

Most of the 2020 raw material inventory build was undertaken to support the higher finished goods demand within the consumer product end markets and to provide Polymer-related safety stock in advance of the Illinois River lock closures.

Accounts payable and accrued liabilities were a source of $12.0 million in 2020 compared to a use of $35.3 million for the same period in 2019.

Working capital requirements were higher in the first nine months of 2020 compared to 2019 primarily due to the changes noted above.

The current year’s increase in inventories cash usage reflects inventory builds to support higher finished goods demand with the consumer products end markets and to provide Polymer-related safety stock as a result of the Illinois River lock closures and a maintenance shutdown planned for the fourth quarter of 2020.

It is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2020.

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Cash used for investing activities increased by $29.6 million year-over-year.

In the first quarter of 2020, the Company acquired certain assets of Logos Technologies LLC's NatSurFact® rhamnolipid-based line of bio-surfactants for $2.0 million.

Cash used for capital expenditures was $54.7 million in the first half of 2020 versus $45.1 million in the comparable prior year period.

Cash used for capital expenditures was $84.9 million in the first nine months of 2020 versus $70.8 million in the comparable prior year period.

Other investing activities were a use of $13.2 million in 2020 versus a source of $2.3 million in 2019.

The current year cash use in other investing activities was primarily attributable to:

(a) the Company’s first quarter 2020 acquisition of certain assets from Logos Technologies LLC’s NatSurFact® business, a rhamnolipid-based line of bio-surfactants derived from renewable resources and;

(b) the Company’s third quarter 2020 acquisition of Clariant’s (Mexico) anionic surfactant business.

For 2020, the Company estimates that total capital expenditures will range from $100 million to $120 million, inclusive of infrastructure and optimization spending in the United States, Germany and Mexico.

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Cash used for financing activities was $44.6 million in 2020 versus $74.4 million in 2019.

Most of this decrease is attributable to the non-recurrence of the voluntary repayment of outstanding principal balance of the Company’s 5.88 percent Senior Notes in the second quarter of 2019.

Most of this decrease is attributable to the non-recurrence of the voluntary prepayment of outstanding principal balance of the Company’s 5.88 percent Senior Notes in the second quarter of 2019.

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 benefit plans.

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The amounts involved may be material.

In the six months ended June 30, 2020, the Company purchased 160,780 shares of its common stock on the open market at a total cost of $13.8 million.

As of June 30, 2020, there were 189,050 shares remaining under the current share repurchase authorization.

In the nine months ended September 30, 2020, the Company purchased 160,780 shares of its common stock on the open market at a total cost of $13.8 million.

As of September 30, 2020, there were 189,050 shares remaining under the current share repurchase authorization.

Debt and Credit Facilities

Consolidated balance sheet debt decreased to $207.9 million as of June 30, 2020 from $222.1 million at December 31, 2019.

Net debt (which is defined as total debt minus cash – see the Reconciliation of Non-GAAP Net Debt section of this MD&A) increased by $28.3 million in the first half of 2020, from a negative $93.3 million to a negative $65.0 million.

This net debt change was due to cash and debt reductions of $42.5 million and $14.2 million, respectively.

The lower cash was partially due to higher working capital requirements in the first half of 2020.

As of June 30, 2020, the ratio of total debt to total debt plus shareholders’ equity was 18.8 percent compared to 19.9 percent at December 31, 2019.

As of June 30, 2020, the ratio of net debt to net debt plus shareholders’ equity was negative 7.8 percent versus negative 11.7 percent as of December 31, 2019.

Consolidated balance sheet debt decreased to $207.9 million as of September 30, 2020 from $222.1 million at December 31, 2019.

Net debt (which is defined as total debt minus cash – see the Reconciliation of Non-GAAP Net Debt section of this MD&A) decreased by $9.2 million in the first nine months of 2020, from a negative $93.3 million to a negative $102.5 million, primarily due to scheduled debt repayments of $14.3 million.

As of September 30, 2020, the ratio of total debt to total debt plus shareholders’ equity was 18.1 percent compared to 19.9 percent at December 31, 2019.

As of September 30, 2020, the ratio of net debt to net debt plus shareholders’ equity was negative 12.3 percent versus negative 11.7 percent as of December 31, 2019.

See the “Reconciliation of Non-GAAP Net Debt” section in this MD&A.

At June 30, 2020, the Company’s debt included $207.9 million of unsecured private placement loans with maturities ranging from 2020 through 2027, which were issued to insurance companies pursuant to note purchase agreements (the Note Purchase Agreements).

At September 30, 2020, the Company’s debt included $207.9 million of unsecured private placement loans with maturities ranging from 2020 through 2027, which were issued to insurance companies pursuant to note purchase agreements (the Note Purchase Agreements).

These notes are the Company’s primary source of long-term debt financing and are supplemented by bank credit facilities to meet short and medium-term needs.

On January 30, 2018, the Company entered a five-year committed $350 million multi-currency revolving credit facility with a syndicate of banks that matures on January 30, 2023.

This credit agreement allows the Company to make unsecured borrowings, as requ ested from time to time, to finance working capital needs, permitted acquisitions, capital expenditures and for general corporate purposes.

On January 30, 2018, the Company entered a five-ye ar committed $350 million multi-currency revolving credit facility with a syndicate of banks that matures on January 30, 2023.

This credit agreement allows the Company to make unsecured borrowings, as requested from time to time, to finance working capital needs, permitted acquisitions, capital expenditures and for general corporate purposes.

This unsecured facility is the Company’s primary source of short-term borrowings.

As of June 30, 2020, the Company h ad outstanding letters of credit totaling $5.5 million under the revolving credit agreement and no borrowings, with $344.5 million remaining available.

As of September 30, 2020, the Company had outstanding letters of credit totaling $5.3 million under the revolving credit agreement and no borrowings, with $344.7 million remaining available.

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 expenditure programs and acquisitions.

At June 30, 2020, the Company’s foreign subsidiaries had no outstanding debt.

At September 30, 2020, the Company’s foreign subsidiaries had no outstanding debt.

The Company has material debt agreements that require the maintenance of minimum interest coverage and minimum net worth.

These agreements also limit the incurrence of additional debt as well as the payment of dividends and repurchase of treasury shares.

As of June 30, 2020, testing for these agreements was based on the Company’s consolidated financial statements.

As of September 30, 2020, testing for these agreements was based on the Company’s consolidated financial statements.

Under the most restrictive of these debt covenants:

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The maximum amount of dividends that could have been paid within this limitation is disclosed as unrestricted retained earnings in Note 14 to the condensed consolidated financial statements.

The Company believes it was in compliance with all of its loan agreements as of June 30, 2020.

The Company believes it was in compliance with all of its loan agreements as of September 30, 2020.

ENVIRONMENTAL AND LEGAL MATTERS

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

During the first six months of 2020 and 2019, the Company’s expenditures for capital projects related to the environment were $2.1 million and $0.7 million, respectively.

During the first nine months of 2020 and 2019, the Company’s expenditures for capital projects related to the environment were $4.2 million and $1.3 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 $17.6 million and $15.2 million for the six months ended June 30, 2020 and 2019, 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 $26.5 million and $22.8 million for the nine months ended September 30, 2020 and 2019, respectively.

Over the years, the Company has received requests for information related to or has been named by the government as a PRP 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 $22.7 million to $41.7 million at June 30, 2020, compared to $25.9 million to $43.7 million at December 31, 2019.

After partial remediation payments at certain sites, the Company has estimated a range of possible environmental and legal losses of $22.4 million to $41.1 million at September 30, 2020, compared to $25.9 million to $43.7 million at December 31, 2019.

Within the range of possible environmental losses, management 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;

that accrual totaled $22.7 million at June 30, 2020 and $25.9 million at Decembe r 31, 2019.

that accrual totaled $22.4 million at September 30, 2020 and $25.9 million at December 31, 2019.

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

Cash expenditures related to legal and environmental matters were $3.1 million for the six months ended June 30, 2020, compared to $2.5 million for the same period in 2019.

Cash expenditures related to legal and environmental matters were $3.8 million for the nine mont hs ended September 30, 2020, compared to $2.8 million for the same period in 2019.

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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Consequently, the Company is unable to predict the effect thereof on the Company’s financial position, cash flows and results of operations.

Based upon the Company’s present knowledge with respect to its involvement at these sites, the possibility of other viable entities’ responsibilities for cleanup, and the extended period over which any costs would be incurred, management believes that the Company has no liability at these sites and that these matters, individually and in the aggregate, will not have a material effect on the Company’s financial position.

Based upon the Company’s present knowledge with respect to its involvement at these sites, the possibility of other viable entities’ responsibilities for cleanup, and the extended period over which any costs would be incurred, management believes that the Company has no material liability at these sites and that these matters, individually and in the aggregate, will not have a material effect on the Company’s financial position.

Certain of these matters are discussed in Item 1, Part 2, of the Company’s Annual Report on Form 10-K, Legal Proceedings, in this report and in other filings of the Company with SEC, which are available upon request from the Company.

See also Note 8, Contingencies , to the condensed consolidated financial statements for a summary of the environmental proceedings related to certain environmental sites.

Management believes 2020 will be a challenging year as a result of the global pandemic but believes the Company is better positioned to perform than many others.

Management believes the Company’s Surfactant segment should benefit from higher demand in the consumer product end market, driven by increased demand for cleaning, disinfection and personal wash products.

With lower oil prices management believes demand for surfactants in the oilfield market will remain down for the balance of 2020.

Management believes its Polymer segment will be challenged for the remainder of the year as construction projects are deferred or canceled as a result of COVID-19.

Management continues to anticipate higher North American costs due to the Illinois River lock closures occurring during the second half of 2020.

Management believes the long-term prospects for the Polymer segment remain attractive because of ongoing energy conservation efforts and more stringent building codes.

Management believes the Company’s Surfactant segment should continue to benefit from higher demand in the consumer product end markets, driven by increased demand for cleaning, disinfection and personal wash products.

Management believes the demand for surfactants within the agricultural market will approximate prior year and that the oilfield market will remain down for the balance of 2020.

Management believes its Polymer segment will continue to be challenged for the remainder of the year as construction projects have been deferred or canceled as a result of COVID-19.

Management believes the long-term prospects for the Polymer segment remain attractive because of energy conservation efforts and more stringent building codes.

Management believes full year Specialty Products results will approximate 2019 results.

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RECONCILIATION OF NON-GAAP ADJUSTED NET INCOME AND EARNINGS PER SHARE

Three Months Ended June 30

Three Months Ended September 30

(In millions, except per share amounts)

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Cash-settled SARs Expense

Environmental Remediation Expense

Early Debt Repayment Expense

Cumulative Tax Effect on Above Adjustment Items

Adjusted Net Income

Six Months Ended June 30

Nine Months Ended September 30

(In millions, except per share amounts)

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This adjusted measure should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP.

The Company's definition of this adjusted measure may differ from similarly titled measures used by other entities.

The Company had negative net debt on June 30, 2020 as cash balances of $272.9 million exceeded total debt of $207.9 million.

The Company's definition of this adjusted measure may differ from similarly titled

measures used by other entities.

The Company had negative net debt on September 30, 2020 as cash balances of $310.4 million exceeded total debt of $208.0 million.

(In millions)

September 30,

Current Maturities of Long-Term Debt as Reported

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis