What changed in this filing

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Item 1. Business

2021-02-26 compared with 2020-02-27 · 61 added, 40 removed, 62 unchanged (62% of the section changed)

2 unchanged sentences

Surfactants, Polymers and Specialty Products.

Revenue-Generating Products

Surfactants are chemical agents that affect the interaction between two surfaces;

9 unchanged sentences

Specialty Products are chemicals used in food, flavoring, nutritional supplement and pharmaceutical applications.

MARKETING AND COMPETITION

Principal customers for surfactants are manufacturers of detergents, shampoos, body wash, fabric softeners, toothpastes and cosmetics.

In addition, surfactants are sold to the producers of agricultural herbicides and insecticides and lubricating products.

Surfactants are also sold into the oilfield market to aid production, drilling and hydraulic fracking.

Polymers are used in the construction and appliance industries, as well as in applications for the coatings, adhesives, sealants and elastomers industries.

Phthalic anhydride, a Polymer product, is also used by automotive, boating and other consumer product companies.

Specialty products are used primarily by food, nutritional supplement and pharmaceutical manufacturers.

Competitive Conditions

The Company does not sell directly to the retail market but sells to a wide range of manufacturers in many industries and has many competitors.

5 unchanged sentences

In specialty products, the Company competes with several large firms plus numerous small companies.

MAJOR CUSTOMER AND BACKLOG

The Company did not have any one customer whose business represented more than 10 percent of the Company’s consolidated revenue in 2019, 2018 or 2017.

The Company has contract arrangements with certain customers, but volumes are generally contingent on purchaser requirements.

Much of the Company’s business is essentially on a “spot delivery basis” and does not involve a significant backlog.

ENERGY SOURCES

Material Resources

Substantially all of the Company’s manufacturing plants operate on electricity and interruptible natural gas.

2 unchanged sentences

In January 2020, the Company’s Millsdale, Illinois facility suffered a power outage that caused a temporary shutdown of the plant and further related operational issues.

All production lines were fully operational prior to the end of the first quarter 2020.

The Company’s operations have not experienced any other plant shutdowns or adverse effects upon its business in recent years that were caused by a lack of available energy sources, other than temporary service interruptions brought on by mechanical failure or severe weather conditions.

RAW MATERIALS

The principal raw materials used by the Company are petroleum or plant based.

For 2020, the Company has contracts with suppliers that cover the majority of its forecasted requirements for major raw materials and is not substantially dependent upon any one supplier.

ENVIRONMENTAL COMPLIANCE

For 2021, the Company has contracts with suppliers that cover most of its forecasted requirements for major raw materials and is not substantially dependent upon any one supplier.

Compliance with Government Regulations

Compliance with applicable country, state and local regulations regarding the discharge of materials into the environment, or otherwise relating to the protection of the environment, resulted in capital expenditures by the Company of $7.8 million during 2020.

These expenditures represented approximately four percent of the Company’s total 2019 capital expenditures.

These expenditures represented approximately six percent of the Company’s total 2020 capital expenditures.

Capitalized environmental expenditures are depreciated and charged on a straight-line basis to pretax earnings over their estimated useful lives, which are typically 10 years.

Recurring costs associated with the operation and maintenance of facilities for waste treatment and waste disposal and managing environmental compliance in ongoing operations at our manufacturing locations were approximately $31.8 million in 2019.

million in 2020.

Compliance with such regulations is not expected to have a material adverse effect on the Company’s earnings and competitive position in the foreseeable future.

Human Capital Resources

At December 31, 2020 and 2019, the Company employed 2,293 and 2,284 persons, respectively.

The Company has collective bargaining agreements with employees at some of its manufacturing locations.

While the Company has experienced occasional work stoppages as a result of the collective bargaining process and may experience some work stoppages in the future, management believes that it will be able to negotiate all labor agreements on satisfactory terms.

Past work stoppages have not had a significant impact on the Company’s operating results.

Overall, the Company believes it has good relationships with its employees.

We view our employees as critical to helping us realize our vision of delivering innovative chemical solutions for a cleaner, healthier, more energy efficient world.

The Company’s five Values reflect our shared commitment to this vision and serve as a guide as we operate our business:

(1) People First:

Empowering Everyone to Make a Difference – we listen, share and recognize great work;

(2) Integrity:

Doing the Right Thing – we do what is right and safe, and can be counted upon to fulfill our commitments and speak up when we have concerns;

(3) Customer Focused:

Partnering to Deliver Value – our approach to collaborative chemistry helps our customers’ products perform and deliver solutions that serve the needs of our global community;

(4) Continuous Improvement:

Improving Every Day – we embrace a spirit of continuous learning to improve the sustainability of our practices and our products;

and (5) Growth, Innovation and Sustainability:

Shaping the Future Through Curiosity – we see incredible possibilities and accept the challenge to make a positive impact.

Safety for all employees, our business partners, and the communities in which we operate continues to be a top priority.

We have a long-standing focus on safety and responsible chemicals management, as well as a commitment to the environmental, health, safety and security performance initiative of the American Chemistry Council (ACC), a U.S.-based industry association.

As part of this focus and commitment, the Company invests in behavior based and task-based safety programs for its global workforce.

The goal of these programs is to help establish habits and behaviors that promote safety awareness, thinking, and responsiveness.

All Company facilities are ISO 9001:2015 certified, and the Company conforms to the ACC Responsible Care Management System (RCMS)® at its U.S.

In addition, facilities outside the United States are encouraged to participate in their country-specific Responsible Care® program equivalents.

Special recognition is given annually to the Company’s facilities that have demonstrated safety achievements.

The President’s Safety Award is given to sites that meet specific criteria for recordable incidents and injuries, as well as other safety and compliance requirements, over the course of the year.

We depend on our highly skilled workforce to reach our business goals, and through a robust commitment to promote safety and well-being, enable professional development, and provide excellent benefits, the Company aims to attract and retain top talent.

We value the fact that we have a diverse, inclusive, and engaged community of workers, and our goal, is to create workplace environments built on respect, safety, strong teamwork, and high competency.

Employee feedback is regularly solicited on workplace practices and culture.

Results from these surveys are used at the corporate and site levels to define needs and develop improvement plans.

Across our operations, employees are encouraged and supported in developing the technical and leadership skills they need to excel at their work and to advance in their roles.

The Company provides an array of opportunities, including our Emerging Leaders Program, Leadership Development Program, technical training and certifications, language training, and educational assistance.

Developing our talent pipeline and retaining our skilled labor force is a key focus, and our objective is to support employees’ progress toward their professional goals through opportunities within the Company.

Employees receive comprehensive and competitive benefits packages aimed at attracting top talent and supporting needs for work-life balance.

Employees are rewarded for their positive contributions to company success with Pay-for-Performance incentives.

Acquisitions and Dispositions

See Note 21, Acquisitions, of the Consolidated Financial Statements (Item 8 of this Form 10-K).

See Note 20, Acquisitions, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for information regarding the Company’s acquisition activities.

The Company’s website address is www.stepan.com.

The Company makes available free of charge on or through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

The website also includes the Company’s code of conduct, corporate governance guidelines and the charters for the audit, compensation and development, compliance and nominating and corporate governance committees of the Board of Directors.

Information About our E xecutive Officers

The Company’s executive officers are elected annually by the Board of Directors at the first meeting following the Annual Meeting of Stockholders to serve through the next annual meeting of the Board and until their respective successors are duly qualified and elected.

The Company makes available free of charge on or through its website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the SEC).

The website also makes available the Company’s sustainability report, code of conduct, corporate governance guidelines and the charters for the audit, compensation and development, compliance and nominating and corporate governance committees of the Company’s Board of Directors.

Information About our Executive Officers

The Company’s executive officers are elected annually by the Board of Directors at the first meeting following the Annual Meeting of Stockholders to serve until their respective successors are duly qualified and elected.

The executive officers of the Company, their ages and certain other information as of February 26, 2021, are as follows:

Quinn Stepan, Jr.

Chairman, President and Chief Executive Officer

Vice President, Supply Chain

Vice President and General Manager – Surfactants

Chairman and Chief Executive Officer

President and Chief Operating Officer

Executive Vice President, Supply Chain

Vice President, Business Enablement

Vice President and General Manager – Polymers

Vice President and General Manager –Surfactants

Vice President and Chief Financial Officer

2 unchanged sentences

Vice President, General Counsel and Secretary

Vice President and General Manager –Polymers

Quinn Stepan, Jr.

assumed the position of Chairman of the Company’s Board of Directors in January 2017.

He has served the Company as President and Chief Executive Officer since January 2006.

He served the Company as President and Chief Operating Officer from 1999 through 2005.

Mergner has served the Company as Vice President, Supply Chain since August 2017.

From April 2014 until August 2017, he served as Vice President and General Manager – Polymers of the Company.

Behrens has served the Company as Vice President and General Manager – Surfactants since September 2014.

From January 2010 to September 2014 he served as Vice President – Business Management.

He has served the Company as Chief Executive Officer since January 2006.

He served the Company as President from January 2006 through December 2020.

Behrens has served the Company as President and Chief Operating Officer since January 2021.

From September 2014 through December 2020, he served as Vice President and General Manager – Surfactants of the Company.

Mergner has served the Company as Executive Vice President, Supply Chain since January 2021.

From August 2017 through December 2020, he served as Vice President, Supply Chain and from April 2014 until August 2017, he served as Vice President and General Manager – Polymers of the Company.

Stefaniak has served the Company as Vice President, Business Enablement since October 2018.

From February 2014 to September 2018, she served as Vice President, Business Transformation of the Company.

Moriarty has served the Company as Vice President and General Manager – Polymers since September 2017.

From September 2014 through September 2017, he served as Vice President and General Manager – North America Surfactants of the Company.

Moriarty has served the Company as Vice President and General Manager – Surfactants since January 2021.

From September 2017 through December 2020, he served as Vice President and General Manager – Polymers and from September 2014 through September 2017, he served as Vice President and General Manager - North America Surfactants of the Company.

Rojo has served the Company as Vice President and Chief Financial Officer since April 2018.

16 unchanged sentences

Kabbes served as General Counsel and Managing Director – Corporate Affairs of Bunge Limited.

From August 2000 to January 2015, Mr.

Kabbes served as Senior Vice President, Corporate and Legal Affairs of Bunge North America, Inc.

Stepan has served the Company as Vice President and General Manager – Polymers since January 2021.

From January 2019 through December 2020, Mr.

Stepan served as Vice President, Consumer Products, and from September 2014 through December 2018, Mr.

Stepan served as Director, Consumer Products, North America of the Company.

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-K

Item 1. Business