39 unchanged sentences
The overall business is comprised of three reportable segments:
−Removed: Surfactants – Surfactants, which accounted for 67 percent of Company consolidated net sales for the first six months of 2021, 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.
+Added: Surfactants – Surfactants, which accounted for 66 percent of Company consolidated net sales for the first nine months of 2021, are principal ingredients in consumer and industrial cleaning and disinfection products such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes.
Other applications include fabric softeners, germicidal quaternary compounds, disinfectants, lubricating ingredients, emulsifiers for spreading agricultural products and industrial applications such as latex systems, plastics and composites.
10 unchanged sentences
These bio-surfactants offer synergies in several strategic end use markets including oilfield, agriculture, personal care and household, industrial and institutional.
−Removed: The Company has focused its efforts to further develop, integrate and commercialize these unique surfactants moving forward.
+Added: The Company continues to focus its efforts to further develop, integrate and commercialize these unique surfactants.
The Company believes the rhamnolipid technology will further advance the growth and sustainability aspirations of both the Company and its customers.
11 unchanged sentences
See Note 17, Acquisitions , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details.
−Removed: Polymers – Polymers, which accounted for 30 percent of consolidated net sales for the first six months of 2021, include polyurethane polyols, polyester resins and phthalic anhydride.
+Added: Polymers – Polymers, which accounted for 31 percent of consolidated net sales for the first nine months of 2021, include polyurethane polyols, polyester resins and phthalic anhydride.
Polyurethane polyols are used in the manufacture of rigid foam for thermal insulation in the construction industry and are also a base raw material for coatings, adhesives, sealants and elastomers (collectively, CASE products).
5 unchanged sentences
Phthalic anhydride is manufactured at the Company’s Millsdale, Illinois site and specialty polyols are manufactured at the Company’s Columbus, Georgia, site.
−Removed: In Europe, polyurethane polyols are manufactured by the Company’s subsidiary in Germany and Vlissingen, Netherlands (see the INVISTA acquisition discussion below) and specialty polyols are manufactured by the Company’s Poland subsidiary.
+Added: In Europe, polyurethane polyols are manufactured at the Company’s subsidiaries in Germany and Vlissingen, Netherlands (see the INVISTA acquisition discussion below) and specialty polyols are manufactured by the Company’s Poland subsidiary.
In China, polyurethane polyols and specialty polyols are manufactured at the Company’s Nanjing, China, plant.
Recent significant events include:
−Removed: 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 half of 2020.
+Added: The operational issues at the Company’s Millsdale, Illinois facility, described in the Surfactants significant events paragraph above, negatively impacted Polymer’s earnings during the first nine months of 2020.
In January 2021, the Company purchased INVISTA’s aromatic polyester polyol business and associated assets.
Included in the transaction were two manufacturing sites, one in Wilmington, North Carolina and the other in Vlissingen, Netherlands, along with intellectual property, customer relationships, inventory and working capital.
−Removed: This acquisition expands the Company’s manufacturing capabilities in both the United States and Europe and enhances the Company’s business continuity capabilities for the market.
+Added: This acquisition expanded the Company’s manufacturing capabilities in both the United States and Europe and enhanced the Company’s business continuity capabilities for the market.
The Company believes that INVISTA’s available spare capacity, combined with debottlenecking opportunities in both plants, will allow Stepan to support future market growth in a capital efficient way.
See Note 17, Acquisitions , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details.
−Removed: Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first six months of 2021, include flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement, and pharmaceutical applications.
+Added: Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first nine months of 2021, 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, by third-party contractors.
2 unchanged sentences
Included in the transaction were two manufacturing sites, one in Wilmington, North Carolina and the other in Vlissingen, Netherlands along with intellectual property, customer relationships, inventory and working capital.
−Removed: This acquisition expands the Company’s manufacturing capabilities in both the United States and Europe and enhances the Company’s business continuity capabilities for the market.
+Added: This acquisition expanded the Company’s manufacturing capabilities in both the United States and Europe and enhanced the Company’s business continuity capabilities for the market.
The Company believes that INVISTA’s available spare capacity, combined with debottlenecking opportunities in both plants, will allow Stepan to support future market growth in a capital efficient way.
15 unchanged sentences
The accounting for the Company’s deferred compensation plans can cause period-to-period fluctuations in Company income and expenses.
−Removed: Compensation expense results when the values of Company common stock and mutual fund investment assets held for the plans increase, and compensation income results when the values of Company common stock and mutual fund investment assets
+Added: Compensation expense results when the values of Company common stock and mutual fund investment assets held for the plans increase, and compensation income results when the values of Company common stock and mutual fund investment assets decline.
The pretax effect of all deferred compensation-related activities (including realized and unrealized gains and losses on the mutual fund assets held to fund the deferred compensation obligations) and the income statement line items in which the effects of the activities were recorded are displayed in the following tables:
1 unchanged sentence
For the Three Months
−Removed: Ended June 30
+Added: Ended September 30
(In millions)
Deferred Compensation (Administrative expenses)
−Removed: Realized/Unrealized Gains on Investments (Other, net)
+Added: Realized/Unrealized Gains (Losses) on Investments (Other, net)
Investment Income (Other, net)
1 unchanged sentence
Income (Expense)
−Removed: For the Six Months
−Removed: Ended June 30
+Added: For the Nine Months
+Added: Ended September 30
(In millions)
11 unchanged sentences
dollar results).
−Removed: 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, 2021 and 2020:
+Added: 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 nine months ended September 30, 2021 and 2020:
Three Months Ended
(In millions)
−Removed: Due to Foreign
+Added: Increase due to Foreign
Operating Income
Pretax Income
−Removed: Six Months Ended
+Added: Nine Months Ended
(In millions)
3 unchanged sentences
RESULTS OF OPERATIONS
−Removed: Three Months Ended June 30, 2021 and 2020
−Removed: Net income attributable to the Company in the second quarter of 2021 increased 21 percent to $43.3 million, or $1.85 per diluted share, from $35.7 million, or $1.54 per diluted share, in the second quarter of 2020.
−Removed: Adjusted net income increased 10 percent to $42.2 million, or $1.81 per diluted share, from $38.3 million, or $1.65 per diluted share, in 2020 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income attributable to the Company and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).
−Removed: Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the second quarter of 2021 compared to the second quarter of 2020.
−Removed: A detailed discussion of segment operating performance for the second quarter of 2021 compared to the second quarter of 2020 follows the summary.
+Added: Three Months Ended September 30, 2021 and 2020
+Added: Net income attributable to the Company in the third quarter of 2021 increased 11 percent to $36.9 million, or $1.59 per diluted share, from $33.2 million, or $1.43 per diluted share, in the third quarter of 2020.
+Added: Adjusted net income was $36.4 million in both the third quarter of 2021 and 2020, or $1.57 and $1.56 per diluted share, respectively (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income attributable to the Company and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).
+Added: Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the third quarter of 2021 compared to the third quarter of 2020.
+Added: A detailed discussion of segment operating performance for the third quarter of 2021 compared to the third quarter of 2020 follows the summary.
Consolidated net sales increased $138.2 million, or 30 percent, between quarters.
1 unchanged sentence
The increase in average selling prices was mainly due to the pass-through of higher raw material costs and more favorable customer and product mix.
−Removed: Consolidated sales volume increased five percent, which had an $22.7 million favorable impact on the change in net sales.
−Removed: Sales volume in the Polymer and Specialty Products segments increased 44 percent and 17 percent, respectively.
−Removed: The increase in Polymer sales volume was primarily attributable to the first quarter 2021 INVISTA polyester polyol acquisition and the gradual recovery from COVID-19 delays and cancellations of re-roofing and new construction projects.
−Removed: The Specialty Products sales volume growth primarily reflects order timing differences within the food and flavor business.
+Added: Consolidated sales volume increased one percent, which had a $6.3 million favorable impact on the change in net sales.
+Added: Sales volume in the Polymer and Specialty Products segments increased 27 percent and nine percent, respectively.
+Added: The increase in Polymer sales volume was primarily attributable to the first quarter 2021 INVISTA polyester polyol acquisition.
+Added: The Specialty Products sales volume growth primarily reflects order timing differences within the food and flavor business and higher customer demand for medium chain triglycerides products.
Sales volume in the Surfactant segment decreased six percent quarter-over-quarter mostly due to lower sales volume in the consumer product end markets.
−Removed: The consumer product business was negatively impacted by feedstock supply issues following the first quarter 2021 severe weather in Texas, customer inventory rebalancing efforts and lower demand for consumer cleaning products versus the pandemic peak in 2020.
+Added: The consumer product business was negatively impacted by supply chain disruptions, feedstock supply issues following third quarter 2021 severe weather in the U.S.
+Added: Gulf Coast area and lower demand for consumer cleaning products versus the COVID-19 pandemic peak in 2020.
Foreign currency translation favorably impacted the change in net sales by $5.9 million due to a weaker U.S.
−Removed: dollar against all currencies where the Company has foreign operations.
−Removed: Operating income for the second quarter of 2021 increased $12.0 million, or 27 percent, versus operating income for the second quarter of 2020.
−Removed: Polymer and Specialty Products operating income increased $7.5 million and $3.8 million, respectively.
−Removed: Surfactant operating income decreased $2.6 million versus the second quarter of 2020.
+Added: dollar against most currencies where the Company has foreign operations.
+Added: Operating income for the third quarter of 2021 decreased $2.2 million, or five percent, versus operating income for the third quarter of 2020.
+Added: Surfactant and Polymer operating income decreased $6.7 million and $2.6 million, respectively.
+Added: Specialty Products operating income increased $0.8 million versus the third quarter of 2020.
+Added: Surfactant and Polymer operating income in the third quarter of 2020 benefited from $2.2 million and $2.8 million, respectively, of partial insurance recovery related to the first quarter 2020 Millsdale, IL power outage.
Corporate expenses, including business restructuring and deferred compensation expenses, decreased $6.3 million quarter-over-quarter.
1 unchanged sentence
Corporate expenses (excluding deferred compensation and business restructuring expenses) increased $0.9 million quarter-over-quarter.
−Removed: Foreign currency translation has a $1.7 million positive impact on operating income in the second quarter of 2021 versus the prior year quarter.
−Removed: Operating expenses (including deferred compensation and business restructuring expenses) increased $1.2 million, or two percent between quarters.
+Added: Foreign currency translation has a $0.5 million positive impact on operating income in the third quarter of 2021 versus the prior year quarter.
+Added: Operating expenses (including deferred compensation and business restructuring expenses) decreased $3.0 million, or five percent between quarters.
Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:
−Removed: Selling expenses increased $2.1 million, or 16 percent, primarily due higher salaries, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
−Removed: Administrative expenses increased $3.2 million, or 16 percent, primarily due to higher acquisition-related expenses, insurance premiums, cloud application costs and corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020).
−Removed: Research, development, and technical service (R&D) expenses increased $1.5 million, or 11 percent primarily due to higher salaries, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
−Removed: Deferred compensation expense decreased $5.5 million quarter-over-quarter primarily due to a $6.84 per share decrease in the market price of Company common stock in the second quarter of 2021 compared to a $8.64 per share increase in the second quarter of 2020.
+Added: Selling expenses increased $1.5 million, or 11 percent, primarily due to higher salaries and a higher bad debt provision expense.
+Added: Administrative expenses increased $1.5 million, or seven percent, primarily due to higher USEPA environmental remediation oversight costs, insurance premiums and salaries.
+Added: Research, development, and technical service (R&D) expenses increased $1.2 million, or eight percent, primarily due to higher salaries.
+Added: Deferred compensation expense decreased $7.1 million quarter-over-quarter primarily due to a $7.33 per share decrease in the market price of Company common stock in the third quarter of 2021 compared to an $11.90 per share increase in the third quarter of 2020.
See the Overview and Segment Results-Corporate Expenses sections of this MD&A for further details.
−Removed: Business restructuring charges totaled $0.1 million in the second quarter of 2021 versus $0.2 million in the second quarter of 2020.
−Removed: The 2021 and 2020 restructuring charges reflect ongoing decommissioning costs associated with the Company’s manufacturing facility in Canada.
+Added: Business restructuring charges were $0.1 million in both the third quarter of 2021 and 2020.
+Added: The 2021 and 2020 restructuring charges reflect ongoing decommissioning costs associated with the Company’s Canadian plant closure.
See Note 16, Business Restructuring , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details.
−Removed: Net interest expense for the second quarter of 202 1 increased $0.
−Removed: 3 million, or 2 4 percent, versus the second quarter of 2020 .
−Removed: This increase was primarily due to lower interest income r esulting from lower interest rates due to global market conditions and higher interest expense related to revolving credit agreement borrowings .
−Removed: Partially offsetting the above was lower interest expense resulting from scheduled debt repayments.
−Removed: Other, net was $2.8 million of income in the second quarter of 2021 versus $4.4 million of income in the second quarter of 2020.
−Removed: The Company recognized $2.4 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 2021 compared to $4.0 million of investment income in the second quarter of 2020.
−Removed: In addition, the Company reported $0.1 million of foreign exchange gains in the second quarter of 2021 versus $0.4 million of foreign exchange gains in the second quarter of 2020.
−Removed: The Company also reported $0.2 million of higher net periodic pension cost benefits in the second quarter of 2021 versus the prior year quarter.
−Removed: The Company’s effective tax rate was 25.1 percent for the second quarter of 2021 compared to 25.0 percent for the second quarter of 2020.
+Added: Net interest expense for the third quarter of 2021 decreased two percent versus the third quarter of 2020.
+Added: Other, net was $0.7 million of income in the third quarter of 2021 versus $2.6 million of income in the third quarter of 2020.
+Added: The Company recognized less than $0.1 million of investment losses (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the third quarter of 2021 compared to $2.2 million of investment income in the third quarter of 2020.
+Added: In addition, the Company reported $0.4 million of foreign exchange gains in the third quarter of 2021 versus $0.5 million of foreign exchange gains in the third quarter of 2020.
+Added: The Company also reported $0.4 million of lower net periodic pension costs in the third quarter of 2021 versus the prior year quarter.
+Added: The Company’s effective tax rate was 6.1 percent for the third quarter of 2021 compared to 23.2 percent for the third quarter of 2020.
+Added: The decrease was primarily attributable to:
+Added: (a) a non-recurring favorable tax benefit recognized in the third quarter of 2021 related to the merger of the Company’s three Brazilian entities into a single entity;
+Added: and (b) non-recurring favorable U.S.
+Added: tax benefits recognized in the third quarter of 2021 related to the Company’s research and development tax credits and foreign-derived intangible income (FDII)/global intangible low-taxed income (GILTI) computations.
+Added: The tax benefit recognized in Brazil reflects the eligibility of Brazilian intangibles to be amortized for tax purposes subsequent to the merger of the Company’s three legal Brazilian entities into a single entity.
Segment Results
5 unchanged sentences
(Dollars in thousands)
+Added: September 30,
+Added: September 30,
Operating Income
6 unchanged sentences
Total Operating Income
−Removed: Surfactant net sales for the second quarter of 2021 increased $51.7 million, or 16 percent, versus net sales for the second quarter of 2020.
+Added: Surfactant net sales for the third quarter of 2021 increased $53.9 million, or 16 percent, versus net sales for the third quarter of 2020.
Higher average selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $68.3 million and $6.2 million, respectively.
5 unchanged sentences
(Dollars in thousands)
+Added: September 30,
+Added: September 30,
North America
1 unchanged sentence
Total Surfactants Segment
−Removed: Net sales for North American operations increased $14.1 million, or seven percent, between quarters.
+Added: Net sales for North American operations increased $15.4 million, or eight percent, between quarters.
Higher average selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $39.4 million and $0.4 million, respectively.
The higher average selling prices were mainly due to more favorable product and customer mix and the pass-through of higher raw material costs.
−Removed: Sales volume declined nine percent and negatively impacted the change in net sales by $19.2 million.
+Added: Sales volume declined 12 percent and negatively impacted the change in net sales by $24.4 million.
Lower sales volume in the consumer product end markets accounted for most of the decline.
−Removed: Higher customer demand for products sold to our distribution partners and into the functional product and institutional cleaning end markets partially offset the foregoing decline.
−Removed: The consumer products business was negatively impacted by feedstock supply issues following the first quarter 2021 severe weather in Texas, customer inventory rebalancing efforts and lower demand for consumer cleaning products versus the pandemic peak in 2020.
+Added: Higher customer demand for products sold into the agricultural, oilfield and institutional cleaning end markets partially offset the foregoing decline.
+Added: The consumer products business was negatively impacted by supply chain disruptions, feedstock supply issues following the third quarter 2021 severe weather in the U.S.
+Added: Gulf Coast and lower demand for consumer cleaning products versus the pandemic peak in 2020.
Net sales for European operations increased $16.7 million, or 30 percent, between quarters.
−Removed: The favorable impact of foreign currency translation and higher average selling prices positively impacted the change in net sales by $7.3 million and $5.7 million, respectively.
+Added: Higher average selling prices, a four percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $12.4 million, $2.2 million and $2.1 million, respectively.
+Added: The higher average selling prices were primarily due to more favorable product and customer mix and the pass-through of higher raw material costs.
+Added: The increase in sales volume was primarily due to higher customer demand for products sold into the agricultural and oilfield end markets.
A weaker U.S.
dollar relative to the European euro and British pound sterling led to the positive foreign currency translation effect.
−Removed: The higher average selling prices were primarily due to more favorable product and customer mix and the pass-through of higher raw material costs.
−Removed: Sales volume declined six percent and negatively impacted the change in net sales by $3.4 million.
−Removed: Most of the sales volume decline reflects lower demand for consumer cleaning products versus the pandemic demand peak in 2020.
−Removed: Net sales for Latin American operations increased $23.8 million, or 42 percent, primarily due to higher average selling prices and the favorable impact of foreign currency translation.
−Removed: These items positively impacted the change in net sales by $18.8 million and $5.5 million, respectively.
−Removed: The higher average selling prices were primarily due to the pass-through of higher raw material costs and $2.1 million of revenue recognition related to a VAT tax recovery.
+Added: Net sales for Latin American operations increased $20.8 million, or 34 percent, due to higher average selling prices, the favorable impact of foreign currency translation and a three percent increase in sales volume.
+Added: These items positively impacted the change in net sales by $14.9 million, $4.0 million, and $1.9 million, respectively.
+Added: The higher average selling prices were primarily due to the pass-through of higher raw material costs.
A weaker U.S.
−Removed: dollar relative to the Mexican peso led to most of the favorable foreign currency effect.
−Removed: Sales volume declined one percent and had a $0.5 million unfavorable impact on the change in net sales.
−Removed: The sales volume decline was largely attributable to lower ether sulfate sales due to feedstock supply constraints in Mexico.
−Removed: Net sales for Asian operations increased $4.3 million, or 34 percent, quarter-over-quarter.
−Removed: A 15 percent increase in sales volume, higher average selling prices, and the favorable impact of foreign currency translation positively impacted the change in net sales by $1.9 million, $1.6 million and $0.8 million, respectively.
−Removed: The sales volume growth was largely due to higher demand for products sold to our distribution partners and into the agricultural end market.
−Removed: The higher average selling prices were primarily due to pass-through of higher raw material costs and more favorable product and customer mix.
−Removed: Surfactant operating income for the second quarter of 2021 decreased $2.6 million, or five percent, versus operating income for the second quarter of 2020.
−Removed: Gross profit increased $1.0 million in the second quarter of 2021 versus the second quarter of 2020 and operating expenses increased $3.6 million, or 15 percent.
+Added: dollar relative to the Mexican peso and Brazilian real led to most of the favorable foreign currency effect.
+Added: The sales volume increase reflects higher demand for products sold to our distribution partners, Tier 2 and Tier 3 customers and into the agricultural and consumer products end markets.
+Added: Net sales for Asian operations increased $1.0 million, or seven percent, quarter-over-quarter.
+Added: Higher average selling prices positively impacted the change in net sales by $2.9 million.
+Added: A 10 percent decline in sales volume and the unfavorable impact of foreign currency translation negatively impacted the change in net sales by $1.6 million and $0.3 million, respectively.
+Added: The higher average selling prices primarily reflect the pass-through of higher raw material costs.
+Added: The decline in sales volume was largely due to supply disruptions inclusive of feedstock sourcing constraints.
+Added: Surfactant operating income for the third quarter of 202 1 decreased $ 6.7 million, or 16 percent, versus operating income for the third quarter of 20 20 .
+Added: Gross profit decreased $ 4.3 million in the third quarter of 202 1 versus the third quarter of 20 20 and operating expenses increased $ 2.4 million, or 1 0 percent.
+Added: Supply chain disruptions negatively impacted Surfactant gross profit and operating income d uring the third quarter of 2021 .
Comparisons of gross profit by region and total segment operating expenses and operating income follow:
1 unchanged sentence
(Dollars in thousands)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
Gross Profit and Operating Income
4 unchanged sentences
Surfactants Segment Operating Income
−Removed: Gross profit for North American operations decreased four percent, or $1.8 million, between quarters primarily due to a nine percent decline in sales volume.
+Added: Gross profit for North American operations decreased $4.4 million, or 11 percent, between quarters primarily due to a 12 percent decline in sales volume.
The decline in sales volume negatively impacted the change in gross profit by $4.9 million.
−Removed: Lower sales volume in the consumer product end markets accounted for most of the decline.
−Removed: Higher customer demand for products sold to our distribution partners and into the functional product and institutional cleaning end markets partially offset the above.
+Added: Lower sales volume into the consumer products end markets accounted for most of the decline.
+Added: Higher customer demand for products sold into the agricultural, oilfield and institutional cleaning end markets partially offset the above.
Higher average unit margins positively impacted the change in gross profit by $0.5 million.
−Removed: The higher unit margins reflect a more favorable product and customer mix that was largely offset by higher supply chain costs due to inflationary pressures (inclusive of transportation costs) and higher planned maintenance ($2.2 million).
−Removed: Gross profit for European operations decreased $0.9 million, or ten percent, primarily due to lower average unit margins and a six percent decline in sales volume.
−Removed: These items negatively impacted the change in gross profit by $1.1 million and $0.6 million, respectively.
−Removed: Most of the sales volume decline reflects lower demand for consumer cleaning products versus the pandemic peak in
−Removed: The favorable impact of foreign currency translation positively impacted the change in gross profit by $0.8 million and reflects a weaker U.S.
+Added: The higher unit margins reflect a more favorable product and customer mix that was largely offset by higher supply chain costs due to inflationary pressures (inclusive of transportation costs) and higher planned maintenance expenses.
+Added: The prior year third quarter benefited from a $2.2 million partial insurance recovery related to the first quarter 2020 Millsdale, IL plant power outage.
+Added: Gross profit for European operations increased $0.8 million, or nine percent, due to a four percent increase in sales volume, the favorable impact of foreign currency translation and higher average unit margins.
+Added: These items favorably impacted the change in gross profit by $0.4 million, $0.2 million, and $0.2 million, respectively.
+Added: Most of the sales volume increase reflects higher demand for products sold into the agricultural and oilfield end markets.
+Added: The favorable impact of foreign currency translation reflects a weaker U.S.
dollar relative to the European euro and British pound sterling.
−Removed: Gross profit for Latin American operations increased $5.0 million, or 41 percent, between quarters primarily due to higher average unit margins and the favorable impact of foreign currency translation.
−Removed: These items positively impacted the change in gross profit by $4.1 million and $1.0 million, respectively.
−Removed: The higher unit margins were largely due to $2.1 million of revenue recognition related to a VAT tax recovery during the second quarter of 2021.
−Removed: Slightly lower sales volume negatively impacted the change in gross profit by $0.1 million.
−Removed: Gross profit for Asia operations decreased $1.3 million or 31 percent, between quarters primarily due to lower average unit margins.
−Removed: The lower unit margins negatively impacted the change in gross profit by $1.9 million and primarily reflect higher raw material costs and higher unit overhead costs in Singapore due to unfavorable production timing differences.
−Removed: Sales volume growth of 15 percent partially offset the above and positively impacted the change in gross profit by $0.6 million.
−Removed: Operating expenses for the Surfactant segment increased $3.6 million, or 15 percent, in the second quarter of 2021 versus the second quarter of 2020.
−Removed: This increase was mainly due to higher salaries, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
−Removed: Polymers net sales for the second quarter of 2021 increased $78.1 million, or 70 percent, versus net sales for the same period of 2020.
−Removed: A 44 percent increase in sales volume favorably impacted the change in net sales by $48.9 million.
−Removed: The sales volume growth primarily reflects the first quarter 2021 acquisition of INVISTA’s aromatic polyester polyol business and ongoing recovery from COVID-19 related delays and cancellations of re-roofing and new construction projects.
−Removed: Higher average selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $23.5 million and $5.7 million, respectively.
+Added: Gross profit for Latin American operations decreased $1.1 million, or nine percent, between quarters primarily due to lower average unit margins.
+Added: Lower average unit margins negatively impacted the change in gross profit by $2.0 million.
+Added: The lower unit margins primarily reflect supply chain disruptions which necessitated securing higher cost feedstocks.
+Added: The favorable impact of foreign currency translation and a three percent increase in sales volume positively impacted the change in gross profit by $0.5 million and $0.4 million, respectively.
+Added: Gross profit for Asia operations increased $0.5 million or 16 percent, between quarters primarily due to higher average unit margins.
+Added: The higher average unit margins positively impacted the change in gross profit by $0.8 million.
+Added: The higher unit margins partially reflect lower unit overhead costs in Singapore due to favorable production timing differences.
+Added: A 10 percent decline in sales volume negatively impacted the change in gross profit by $0.3 million.
+Added: Operating expenses for the Surfactant segment increased $2.4 million, or 10 percent, in the third quarter of 2021 versus the third quarter of 2020.
+Added: This increase was mainly due to higher salaries, a higher bad debt provision expense and the unfavorable impact of foreign currency translation.
+Added: Polymer net sales for the third quarter of 2021 increased $82.2 million, or 70 percent, versus net sales for the same period of 2020.
+Added: Higher average selling prices and a 27 percent increase in sales volume favorably impacted the change in net sales by $51.2 million and $31.3 million, respectively.
+Added: The higher average selling prices were mainly due to the pass-through of higher raw material costs.
+Added: The sales volume growth primarily reflects the first quarter 2021 acquisition of INVISTA’s aromatic polyester polyol business.
+Added: The unfavorable impact of foreign currency translation had a $0.3 million negative impact on the change in net sales.
A comparison of net sales by region follows:
4 unchanged sentences
Total Polymers Segment
−Removed: Net sales for North American operations increased $26.8 million, or 39 percent, primarily due to a 35 percent increase in sales volume.
−Removed: The increase in sales volume positively impacted the change in net sales by $24.2 million.
−Removed: Sales volume of polyols used in rigid foam applications increased 23 percent during the quarter primarily due to the first quarter 2021 INVISTA polyester polyol acquisition and the gradual recovery from COVID-19 related delays of re-roofing and new construction projects.
−Removed: Sales volume of polyols used in rigid foam applications, excluding the impact of the INVISTA acquisition, increased 2 percent.
−Removed: Sales volume of phthalic anhydride and specialty polyols increased 71 percent and 85 percent, respectively, due to stronger demand within these markets following the peak of the COVID-19 pandemic.
−Removed: The phthalic anhydride sales volume improvement was also attributable to the non-recurrence of the Millsdale plant power outage in 2020.
−Removed: Higher average selling prices positively impacted the change in net sales by $2.6 million.
+Added: Net sales for North American operations increased $35.4 million, or 52 percent, primarily due to higher average selling prices and a 21 percent increase in sales volume.
+Added: These two items positively impacted the change in net sales by $21.3 million and $14.1 million, respectively.
The higher average selling prices were mainly due to the pass-through of higher raw material costs.
+Added: Sales volume of polyols used in rigid foam applications increased 32 percent during the quarter primarily due to first quarter 2021 INVISTA polyester polyol acquisition.
+Added: Sales volume of polyols used in rigid foam applications, excluding the impact of the INVISTA acquisition, increased six percent.
+Added: Sales volume of specialty polyols increased 18 percent due to stronger demand within this market following reduced demand in 2020 caused by the impacts of the COVID-19 pandemic.
+Added: Sales volume of phthalic anhydride declined five percent.
Net sales for European operations increased $44.5 million, or 116 percent, quarter-over-quarter.
−Removed: A 79 percent increase in sales volume and higher average selling prices positively impacted the change in net sales by $25.8 million and $19.6 million, respectively.
−Removed: The increase in sales volume is primarily due to the first quarter 2021 INVISTA polyester polyol acquisition and the gradual recovery from COVID-19 related delays of re-roofing and new construction projects.
−Removed: Sales volume, excluding the impact of the INVISTA acquisition, increased 23 percent.
+Added: Higher average selling prices and a 44 percent increase in sales volume positively impacted the change in net sales by $28.6 million and $16.9 million, respectively.
+Added: The increase in sales volume is due to the first quarter 2021 INVISTA polyester polyol acquisition.
The higher average selling prices were primarily due to the pass-through of higher raw material costs.
−Removed: The favorable impact of foreign currency translation positively impacted the change in net sales by $4.4 million.
+Added: The unfavorable impact of foreign currency translation negatively impacted the change in net sales by $1.0 million.
Net sales for Asia and Other operations increased $2.2 million, or 23 percent, primarily due to higher average selling prices and the favorable impact of foreign currency translation.
−Removed: These items positively impacted the change in net sales by $1.3 million each.
−Removed: Sales volume declined 10 percent quarter-over-quarter and negatively impacted the change in net by $1.0 million.
−Removed: Polymers operating income for the second quarter of 202 1 increased $7.
−Removed: 5 million, or 48 percent, versus operating income for the second quarter of 20 20 .
−Removed: Gross profit increased $ 8 .4 million, or 38 percent , and operating expenses were up $0.8 million , or 13 percent .
+Added: These items positively impacted the change in net sales by $1.7 million and $0.7 million, respectively.
+Added: Sales volume declined two percent quarter-over-quarter and negatively impacted the change in net sales by $0.2 million.
+Added: Polymer operating income for the third quarter of 2021 decreased $2.6 million, or 12 percent, versus operating income for the third quarter of 2020.
+Added: Gross profit decreased $1.5 million, or five percent, and operating expenses were up $1.2 million, or 17 percent.
+Added: The decline in 2021 third quarter earnings primarily reflects the non-recurrence of two third quarter 2020 events:
+Added: (i) a $2.8 million partial insurance recovery related to the first quarter 2020 Millsdale, IL plant power outage, and (ii) a $1.2 million partial settlement received from the Chinese government as compensation for the government-mandated China JV shutdown in 2012.
+Added: In addition, supply chain disruptions negatively impacted Polymer gross profit and operating income during the third quarter of 2021.
Comparisons of gross profit by region and total segment operating expenses and operating income follow:
1 unchanged sentence
(Dollars in thousands)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
Gross Profit and Operating Income
4 unchanged sentences
Polymers Segment Operating Income
−Removed: Gross profit for North American operations increased $3.2 million, or 25 percent, primarily due to a 35 percent increase in sales volume.
−Removed: The higher sales volume positively impacted the quarter-over-quarter change in gross profit by $4.5 million.
−Removed: Partially offsetting the higher volume were lower average unit margins, which negatively impacted the change in gross profit by $1.3 million.
−Removed: The lower unit margins in 2021 primarily reflect higher supply chain costs due to inflationary pressures (inclusive of transportation costs), higher planned maintenance ($0.3 million) and the rapid rise in feedstock costs.
−Removed: Gross profit for European operations increased $7.1 million, or 115 percent, versus the second quarter of 2021.
−Removed: A 79% increase in sales volume, higher average unit margins and the favorable impact of foreign currency translation positively impacted the quarter-over-quarter change in gross profit by $4.9 million, $1.5 million and $0.7 million, respectively.
−Removed: Gross profit for Asia and Other operations declined $1.9 million, or 56 percent, between quarters.
−Removed: Lower average unit margins and a 10 percent decline in sales volume negatively impacted the quarter-over-quarter change in gross profit by $1.8 million and $0.3 million, respectively.
−Removed: The lower unit margins are primarily due to the non-recurrence of a second quarter 2020 partial government reimbursement related to the government-mandated China joint venture (JV) shutdown in 2012 ($1.1 million).
−Removed: The favorable impact of foreign currency translation positively impacted the change in gross profit by $0.2 million.
−Removed: Operating expenses for the Polymers segment increased $0.9 million, or 13 percent, in the second quarter of 2021 versus the second quarter of 2020.
+Added: Gross profit for North American operations decreased $4.9 million, or 26 percent, primarily due to lower average unit margins.
+Added: These lower unit margins negatively impacted the change in gross profit by $8.8 million.
+Added: These lower unit margins were due in large part to the non-recurrence of a $2.8 million partial insurance recovery, related to the first quarter 2020 Millsdale, IL plant power outage, in the third quarter of 2020.
+Added: The lower unit margins in 2021 also reflect higher supply chain costs due to feedstock costs, feedstock availability and inflationary pressures (inclusive of transportation costs).
+Added: A 21 percent increase in sales volume partially offset the above and favorably impacted the change in gross profit by $3.9 million.
+Added: Gross profit for European operations increased $4.6 million, or 58 percent, versus the third quarter of 2021.
+Added: A 44 percent increase in sales volume and higher average unit margins favorably impacted the quarter-over-quarter change in gross profit by $3.5 million and $1.1 million, respectively.
+Added: The increase in sales volume is due to the first quarter 2021 INVISTA polyester polyol acquisition.
+Added: Gross profit for Asia and Other operations declined $1.2 million, or 49 percent, between quarters primarily due to lower average unit margins.
+Added: The lower average unit margins negatively impacted the quarter-over-quarter change in gross profit by $1.2 million.
+Added: The lower unit margins were primarily due to the non-recurrence of a third quarter 2020 partial government settlement related to the government-mandated China JV shutdown in 2012 ($1.2 million).
+Added: Foreign currency translation positively impacted the change in gross profit by $0.1 million and a two percent decline in sales volume had a negative $0.1 million quarter-over-quarter impact.
+Added: Operating expenses for the Polymers segment increased $1.2 million, or 17 percent, in the third quarter of 2021 versus the third quarter of 2020.
+Added: The majority of the increase was due to higher salaries and incremental expenses incurred in 2021 due to the INVISTA polyester polyol acquisition.
Specialty Products
−Removed: Net sales for the second quarter of 2021 increased $5.2 million, or 33 percent, versus net sales for the second quarter of 2020.
−Removed: This increase reflects sales volume growth of 17 percent and higher average selling prices.
−Removed: Gross profit and operating income increased $3.7 million and $3.8 million, respectively.
−Removed: The improvements in gross profit and operating income were primarily attributable to order timing differences within the food and flavor business and improved margins within the medium chain triglycerides (MCT) product line.
+Added: Net sales for the third quarter of 2021 increased $2.2 million, or 15 percent, versus net sales for the third quarter of 2020.
+Added: This increase reflects sales volume growth of nine percent and higher average selling prices.
+Added: Gross profit and operating income increased $0.8 million each.
+Added: The improvements in gross profit and operating income were primarily attributable to order timing differences within the food and flavor business and improved volume and margins within the medium chain triglycerides (MCT) product line.
Corporate Expenses
Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, decreased $6.3 million between quarters.
−Removed: Corporate expenses were $19.2 million in the second quarter of 2021 versus $22.6 million in 2020.
−Removed: This decrease was primarily attributable to lower deferred compensation expense ($5.5 million) that was partially offset by higher acquisition-related expenses, insurance premiums, cloud application costs and corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020).
−Removed: The $5.5 million decrease in deferred compensation expense was primarily due to a $6.84 per share decrease in the market price of Company common stock in the second quarter of 2021 compared to a $8.64 per share increase in the second quarter of 2020.
−Removed: 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, 2021 and 2020:
+Added: Corporate expenses were $16.4 million in the third quarter of 2021 versus $22.7 million in 2020.
+Added: This decrease was primarily attributable to lower deferred compensation expense ($7.1 million) that was partially offset by higher environmental remediation reserve expenses and higher insurance premiums.
+Added: The $7.1 million decrease in deferred compensation expense was primarily due to a $7.73 per share decrease in the market price of Company common stock in the third quarter of 2021 compared to an $11.90 per share increase in the third quarter of 2020.
+Added: 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, 2021 and 2020:
Company Common Stock Price
−Removed: Six Months Ended June 30, 2021 and 2020
−Removed: Net income attributable to the Company in the first half of 2021 increased 33 percent to $83.9 million, or $3.59 per diluted share, from $63.3 million, or $2.72 per diluted share, in the first half of 2020.
−Removed: Adjusted net income was $84.6 million, or 3.62 per diluted share, versus $62.5 million or $2.69 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 a reconciliation 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).
+Added: Nine Months Ended September 30, 2021 and 2020
+Added: Net income attributable to the Company in the first nine months of 2021 increased $24.4 million, or 25 percent, to $120.8 million, or $5.19 per diluted share, from $96.4 million, or $4.15 per diluted share, in the first nine months of 2020.
+Added: Adjusted net income was $121.0 million, or $5.20 per diluted share, versus $98.9 million or $4.25 per diluted share, in the prior year (see the “Reconciliations of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation 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, expenses and income.
−Removed: A detailed discussion of segment operating performance for the first half of 2021 compared to the first half of 2020 follows the summary.
+Added: A detailed discussion of segment operating performance for the first nine months of 2021 compared to the first nine months of 2020 follows the summary.
Consolidated net sales increased $ 360.9 million, or 2 6 percent, between years .
−Removed: Higher average selling prices, a six percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $146.9 million, $51.3 million, and $24.5 million, respectively.
+Added: Higher average selling prices , a four percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $ 273.1 million , $5 7.3 million, and $ 30.5 million, respectively.
The increase in average selling prices was primarily due to more favorable product and customer mix and the pass-through of higher raw material costs.
−Removed: Sales volume in the Polymer and Specialty Product segments increased 39 percent and 11 percent, respectively.
+Added: Sales volume in the Polymer and Specialty Product s segments increased 3 4 percent and 1 0 percent, respectively.
The increase in Polymer sales volume was primarily attributable to the first quarter 2021 INVISTA aromatic polyester polyol acquisition, the gradual recovery from COVID-19 delays and cancellations of re-roofing and new construction projects, and the non-recurrence of the power outage at the Company’s Millsdale , Illinois facility in the first quarter of 2020.
−Removed: Sales volume for the Surfactant segment declined 3 percent year-over-year mostly due to lower volumes in the consumer product end markets.
−Removed: The consumer product business was negatively impacted by feedstock supply issues following the first quarter 2021 severe weather in Texas, customer inventory rebalancing efforts and lower demand for consumer cleaning products versus the pandemic peak in 2020.
+Added: Sales volume for the Surfactant segment declined four p ercent year-over-year mostly due to lower volumes in the consumer product end markets.
+Added: The consumer product business has been negatively impacted by supply chain disruptions, feedstock supply issues in 2021 ( following severe weather in Texas and the U.S.
+Added: G ulf Coast area) , customer inventory rebalancing efforts and lower demand for consumer cleaning products versus the COVID-19 pandemic peak in 2020 .
The favorable foreign currency translation reflects a weaker U.S.
dollar against the majority of currencies where the Company has foreign operations.
−Removed: Operating income for the first half of 2021 increased $25.9 million, or 31 percent, versus operating income for the first half of 2020.
+Added: Operating income for the first nine months of 2021 increased $23.8 million, or 19 percent, versus operating income for the first nine months of 2020.
Polymer, Surfactant and Specialty Products operating income increased $15.3 million, $7.7 million, and $3.2 million, respectively.
Corporate expenses, including business restructuring and deferred compensation expenses, increased $2.5 million year-over-year.
−Removed: Deferred compensation expense increased $4.5 million while business restructuring expenses decreased $0.4 million between years.
−Removed: Corporate expenses (excluding deferred compensation and business restructuring expenses) increased $4.7 million between years largely due to higher acquisition-related expenses, insurance premiums, cloud application costs and corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020).
−Removed: Foreign currency translation has a $1.6 million positive impact on operating income in the second quarter of 2021 versus the prior year quarter.
−Removed: Operating expenses (including deferred compensation and business restructuring expenses) increased $17.0 million, or 18 percent, between years.
+Added: Deferred compensation expense decreased $2.6 million and business restructuring expenses decreased $0.4 million between years.
+Added: Corporate expenses (excluding deferred compensation and business restructuring expenses) increased $5.6 million between years largely due to higher acquisition-related expenses, insurance premiums, USEPA environmental remediation oversight costs, cloud application costs and corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020).
+Added: Foreign currency translation had a $2.2 million positive impact on operating income in the first nine months of 2021 versus the prior year.
+Added: Operating expenses (including deferred compensation and business restructuring expenses) increased $14.0 million, or nine percent, between years.
Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:
−Removed: Selling expenses increased $3.0 million, or 11 percent, year-over-year mainly due to higher salaries and incentive-based compensation expenses, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
−Removed: Administrative expenses increased $7.0 million, or 18 percent, year-over-year primarily due to higher acquisition-related expenses, insurance premiums, salaries and incentive-based compensation expenses, cloud application costs, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
−Removed: R&D expenses increased $2.8 million, or 10 percent, year-over-year primarily due to higher salaries and incentive-based compensation expenses, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
−Removed: Deferred compensation expense increased $4.5 million year-over-year primarily due to a $0.95 per share increase in the market price of Company common stock during the first six months of 2021 compared to a $5.34 per share decrease in the first half of 2020.
+Added: Selling expenses increased $4.6 million, or 11 percent, year-over-year mainly due to higher salaries, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
+Added: Administrative expenses increased $8.5 million, or 14 percent, year-over-year primarily due to higher acquisition-related expenses, USEPA environmental remediation oversight costs, insurance premiums, salaries, cloud application costs, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
+Added: R&D expenses increased $4.0 million, or 10 percent, year-over-year primarily due to higher salaries, outside services, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
+Added: Deferred compensation expense decreased $2.6 million year-over-year primarily due to a $6.38 per share decrease in the market price of Company common stock during the first nine months of 2021 compared to a $6.56 per share increase in the first nine months of 2020.
See the Overview and Segment Results-Corporate Expenses section of this MD&A for further details.
−Removed: Business restructuring expenses were $0.2 million in the first half of 2021 compared to $0.6 million in the first half of 2020.
+Added: Business restructuring expenses were $0.3 million in the first nine months of 2021 compared to $0.7 million in the first nine months of 2020.
The 2021 restructuring charges reflect ongoing decommissioning costs associated with the Company’s manufacturing facility in Canada.
The 2020 restructuring expenses were comprised of 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).
−Removed: Net interest expense for the first half of 202 1 increased $ 0.6 million, or 24 percent, compared to net interest expense for the first half of 20 20 .
−Removed: This increase was primarily due to lower interest income resulting from lower interest rates due to global market conditions and higher interest expense related to rev olv ing credit agreement borrowings .
−Removed: Partially offsetting the above was lower interest expense resulting from scheduled debt repayments.
−Removed: Other, net was $3.5 million of income for the first half of 2021 compared to $1.2 million of income for the first half of 2020.
−Removed: The Company recognized $3.3 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 2021 compared to $0.2 million of income in the first half of 2020.
−Removed: In addition, the Company reported foreign exchange losses of $0.2 million in the first half of 2021 versus $1.0 million of foreign exchange gains in the first half of 2020.
−Removed: The Company also reported $0.5 million of lower net periodic pension costs in the first half of 2021 versus the first half of the prior year.
−Removed: The Company’s effective tax rate was 24.4 percent in the first half of 2021 compared to 23.9 percent in the first half of 2020.
−Removed: The year-over-year increase was primarily attributable to a less favorable geographical mix of income in 2021 that was partially offset by higher tax benefits derived from stock-based compensation awards exercised or distributed in the first half of 2021 versus the first half of 2020.
−Removed: For the Six Months Ended
+Added: Net interest expense for the first nine months of 2021 increased $0.6 million, or 14 percent, compared to net interest expense for the first nine months of 2020.
+Added: This increase primarily reflects lower interest income earned in 2021 due to lower cash deposits.
+Added: Other, net was $4.2 million of income for the first nine months of 2021 compared to $3.8 million of income for the first nine months of 2020.
+Added: The Company recognized $3.2 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 nine months of 2021 compared to $2.5 million of income in the first nine months of 2020.
+Added: In addition, the Company reported foreign exchange gains of $0.1 million in the first nine months of 2021 versus $1.5 million of foreign exchange gains in the first nine months of 2020.
+Added: Company also reported $ 1.1 million of lower net periodic pension cost s in the first nine months of 202 1 versus the first nine months of the prior year .
+Added: The Company’s effective tax rate was 19.6 percent in the first nine months of 2021 compared to 23.7 percent in the first nine months of 2020.
+Added: The year-over-year decrease was primarily attributable to :
+Added: (a) a non-recurring favorable tax benefit recognized in the third quarter of 2021 related to the merger of the Company’s three Brazilian entities into a single entity;
+Added: and (b) non-recurring favorable U.S.
+Added: tax benefits recognized in the third quarter of 2021 related to the Company’s research and development tax credits and FDII/GILTI computations.
+Added: For the Nine Months Ended
(In thousands)
+Added: September 30,
+Added: September 30,
Specialty Products
Total Net Sales
−Removed: For the Six Months Ended
+Added: For the Nine Months Ended
(In thousands)
+Added: September 30,
+Added: September 30,
Operating Income
6 unchanged sentences
Segment Results
−Removed: Surfactants net sales for the first half of 2021 increased $95.5 million, or 14 percent, versus net sales for the first half of 2020.
−Removed: Higher average selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $104.1 and $15.9 million, respectively.
+Added: Surfactant net sales for the first nine months of 2021 increased $149.4 million, or 15 percent, versus net sales for the first nine months of 2020.
+Added: Higher average selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $173.8 million and $22.1 million, respectively.
The higher average selling prices were mainly due to more favorable product and customer mix and the pass-through of higher raw material costs.
−Removed: A three percent decrease in sales volume negatively impacted the year-over-year change in net sales by $24.5 million.
+Added: A four percent decrease in sales volume negatively impacted the year-over-year change in net sales by $46.5 million.
Lower sales volume in the consumer product end markets accounted for most of the sales volume decrease.
A year-over-year comparison of net sales by region follows:
−Removed: For the Six Months Ended
+Added: For the Nine Months Ended
(In thousands)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
North America
4 unchanged sentences
The higher average selling prices were primarily due to more favorable product and customer mix and the pass-through of higher raw material costs.
−Removed: Sales volume declined seven percent and negatively impacted the year-over-year change in net sales by $29.0 million.
−Removed: Lower sales volume in the consumer product end markets accounted for most of the decline.
−Removed: Higher customer demand for products sold to our distribution partners and into the functional product and institutional cleaning end markets partially offset the above.
−Removed: The consumer products business was negatively impacted by feedstock supply issues following the first quarter 2021 severe weather in Texas, customer inventory rebalancing efforts and lower demand for consumer cleaning products versus the pandemic peak in 2020.
+Added: Sales volume declined nine percent and negatively impacted the year-over-year change in net sales by $53.6 million.
+Added: Lower sales volume in the consumer products end markets accounted for most of the decline.
+Added: Higher customer demand for products sold to our distribution partners, Tier 2 and Tier 3 customers and into the agricultural, oilfield and institutional
+Added: cleaning end markets partially offset the above.
+Added: The consumer products business was negatively impacted by supply chain disruptions inclusive of feedstock supply issues following the first quarter 2021 severe weather in Texas and the third quarter 2021 severe weather in the U.S.
+Added: G ulf C oast, customer inventory rebalancing efforts and lower demand for consumer cleaning products versus the COVID-19 pandemic peak in 2020.
Net sales for European operations increased $37.7 million, or 22 percent, year-over-year.
−Removed: The favorable impact of foreign currency translation and higher average selling prices positively impacted the change in net sales by $13.0 million and $10.9 million, respectively.
+Added: Higher average selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $23.4 million and $15.1 million, respectively.
A weaker U.S.
1 unchanged sentence
The higher average selling prices were primarily due to the pass-through of higher raw material costs.
−Removed: Sales volume decreased three percent and negatively impacted the change in net sales by $2.9 million year-over-year.
−Removed: Most of the sales volume decline reflects lower demand for consumer cleaning products versus the pandemic peak in 2020.
−Removed: Net sales for Latin American operations increased $37.4 million, or 36 percent, primarily due to higher average selling prices and a three percent increase in sales volume.
−Removed: These items positively impacted the year-over-year change in net sales by $34.2 million and $3.3 million, respectively.
+Added: Sales volume decreased slightly and negatively impacted the change in net sales by $0.8 million year-over-year.
+Added: Net sales for Latin American operations increased $58.2 million, or 36 percent, due to higher average selling prices, a three percent increase in sales volume and the favorable impact of foreign currency translation.
+Added: These items positively impacted the year-over-year change in net sales by $49.0 million, $5.3 million, and $3.9 million, respectively.
The higher average selling prices reflect more favorable product and customer mix, the pass-through of higher raw material costs, and $2.1 million of revenue recognition in the second quarter of 2021 related to a VAT tax recovery.
−Removed: The year-over-year increase in sales volume was mainly due to higher demand for products sold into the functional product end markets.
−Removed: The unfavorable impact of foreign currency translation negatively impacted the year-over-year change in net sales by $0.1 million.
+Added: The year-over-year increase in sales volume was mainly due to higher demand for products sold into the agricultural and consumer products end markets.
Net sales for Asian operations increased $11.1 million, or 27 percent, year-over-year.
−Removed: Higher average selling prices, a 16 percent increase in sales volume and the favorable impact of foreign exchange translation positively impacted the change in net sales by $4.3 million, $4.1 million, and $1.7 million, respectively.
+Added: Higher average selling prices, a six percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $7.1 million, $2.6 million, and $1.4 million, respectively.
The higher average selling prices were primarily due to the pass through of higher raw material costs and more favorable product and customer mix.
−Removed: The sales volume growth was largely due to higher demand for products sold to our distribution partners and into the agricultural end market.
−Removed: Surfactant operating income for the first half of 202 1 increased $1 4 .4 million, or 17 percent, versus operating income for the first half of 20 20 .
−Removed: Gross profit increased $ 21.0 million, or 1 6 percent, year-over-year and operating expenses increased $ 6 .7 million, or 14 percent.
+Added: The sales volume growth was largely due to higher demand for products sold to our distribution partners, Tier 2 and Tier 3 customers and into the agricultural end market.
+Added: Surfactant operating income for the first nine months of 2021 increased $7.7 million, or six percent, versus operating income for the first nine months of 2020.
+Added: Gross profit increased $16.8 million, or nine percent, year-over-year and operating expenses increased $9.0 million, or 13 percent.
Year-over-year comparisons of gross profit by region and total segment operating expenses and operating income follow:
−Removed: For the Six Months Ended
+Added: For the Nine Months Ended
(In thousands)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
Gross Profit and Operating Income
4 unchanged sentences
Surfactants Segment Operating Income
−Removed: Gross profit for North American operations increased $11.1 million, or 13 percent, year-over-year primarily due to higher average unit margins.
+Added: Gross profit for North American operations increased $6.7 million or five percent year-over-year primarily due to higher average unit margins.
The higher average unit margins positively impacted the change in gross profit by $17.8 million and are primarily due to a more favorable product and customer mix.
−Removed: Lower supply chain expenses, due to the non-recurrence of the Millsdale, Illinois plant power outage in the first quarter of 2020, partially offset by supply chain inflationary pressures (inclusive of transportation costs) and higher planned maintenance in the first half of 2021, also contributed to the higher unit margins.
−Removed: A seven percent decline in sales volume negatively impacted the change in gross profit by $6.1 million.
−Removed: Lower sales volume in the consumer product end markets, partially offset by higher customer demand for products sold to our distribution partners and into the functional product and institutional cleaning end markets, accounted for most of the sales volume decline.
−Removed: Gross profit for European operations increased $0.9 million, or five percent year-over-year.
+Added: Higher 2021 supply chain expenses due to raw material availability, inflationary pressures, logistic constraints and higher planned maintenance were largely offset by high supply chain expenses in 2020 due to the Millsdale, Illinois plant power outage in the first quarter of 2020.
+Added: A nine percent decline in sales volume negatively impacted the change in gross profit by $11.1 million.
+Added: Lower sales volume into the consumer product end markets, partially offset by higher customer demand for products sold to our distribution partners, Tier 2 and Tier 3 customers and into the agricultural, oilfield and institutional cleaning end markets, accounted for most of the sales volume decline.
+Added: Gross profit for European operations increased $1.6 million, or six percent year-over-year.
The favorable impact of foreign currency translation positively impacted the year-over-year change in gross profit by $1.9 million.
−Removed: A three percent decrease in sales volume and lower average unit margins negatively impacted the year-over-year change in gross profit by $0.4 million each.
+Added: A weaker U.S.
+Added: dollar relative to the European euro and British pound sterling led to the favorable foreign currency translation effect.
+Added: Lower average unit margins and a slight decrease in sales volume negatively impacted the year-over-year change in gross profit by $0.2 million and $0.1 million, respectively.
Gross profit for Latin American operations increased $9.1 million, or 28 percent, primarily due to higher average unit margins and a three percent increase in sales volume.
These items positively impacted the change in gross profit by $8.0 million and $1.0 million, respectively.
−Removed: The higher unit margins primarily reflect more favorable customer and product mix and $2.1 million of revenue recognition in the second quarter of 2021 related to a VAT tax recovery.
−Removed: The sales volume growth was primarily driven by higher demand for products sold into the functional product end markets.
−Removed: The unfavorable impact of foreign currency translation negatively impacted the change in gross profit by $0.3 million.
−Removed: Gross profit for Asian operations decreased $1.2 million, or 19 percent, primarily due to lower average unit margins.
+Added: The higher unit margins primarily reflect more favorable customer and product mix and $2.1 million of revenue
+Added: recognition in the second quarter of 2021 related to a VAT tax recovery.
+Added: The sales volume growth was primarily driven by higher demand for products sold into the agricultural and consumer product s end markets .
+Added: The favorable impact of foreign currency translation positively impacted the change in gross profit by $ 0.
+Added: Gross profit for Asian operations decreased $0.7 million, or eight percent, primarily due to lower average unit margins.
The lower unit margins negatively impacted the year-over-year change in gross profit by $1.4 million.
−Removed: Sales volume growth of 16 percent and the favorable impact of foreign currency translation positively impacted the change in gross profit by $1.0 million and $0.1 million, respectively.
+Added: Sales volume growth of six percent and the favorable impact of foreign currency translation positively impacted the change in gross profit by $0.6 million and $0.1 million, respectively.
Operating expenses for the Surfactant segment increased $9.0 million, or 13 percent, year-over-year.
−Removed: Most of the increase was due to higher salaries and incentive-based compensation expenses, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
−Removed: Polymers net sales for the first half of 2021 increased $122.0 million, or 56 percent, versus net sales for the same period of 2020.
−Removed: A 39 percent increase in sales volume favorably impacted the year-over-year change in net sales by $84.3 million.
−Removed: The higher sales volume primarily reflects the first quarter 2021 acquisition of INVISTA’s polyester polyol business as well as organic market growth driven by the ongoing recovery from COVID-19 related delays and cancellations of re-roofing and new construction projects.
−Removed: Higher average selling prices and the favorable impact of foreign currency translation positively affected the year-over-year change in net sales by $29.4 million and $8.3 million, respectively.
+Added: Most of the increase was due to higher salaries, corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) and the unfavorable impact of foreign currency translation.
+Added: Polymer net sales for the first nine months of 2021 increased $204.2 million, or 61 percent, versus net sales for the same period of 2020.
+Added: A 34 percent increase in sales volume, higher selling prices and the favorable impact of foreign currency translation positively impacted the change in net sales by $115.0 million, $81.2 million and $8.0 million, respectively.
+Added: The higher sales volume primarily reflects the first quarter 2021 acquisition of INVISTA’s polyester polyol business as well as organic market growth driven by the recovery from COVID-19 related delays and cancellations of re-roofing and new construction projects in the prior year.
+Added: The higher average selling prices were mainly due to the pass-through of higher raw material costs.
A year-over-year comparison of net sales by region follows:
−Removed: For the Six Months Ended
+Added: For the Nine Months Ended
(Dollars in thousands)
2 unchanged sentences
Total Polymers Segment
−Removed: Net sales for North American operations increased $35.8 million, or 27 percent, primarily due to a 32 percent increase in sales volume.
−Removed: The increase in sales volume positively impacted the change in net sales by $42.0 million.
−Removed: Sales volume of polyols used in rigid foam applications increased 23 percent during the first half of 2021 primarily due to the first quarter 2021 INVISTA polyester polyol acquisition and the gradual recovery from COVID-19 related delays of re-roofing and new construction projects.
−Removed: Sales volume of polyols used in rigid foam applications, excluding the impact of the INVISTA acquisition, increased four percent.
−Removed: Sales volume of phthalic anhydride and specialty polyols increased 74 percent and 40 percent, respectively, due to stronger demand within these markets following the peak of the COVID-19 pandemic.
−Removed: The phthalic anhydride sales volume improvement was also attributable to the non-recurrence of the Millsdale plant power outage in 2020.
−Removed: Lower average selling prices negatively impacted the change in net sales by $6.2 million.
+Added: Net sales for North American operations increased $71.3 million, or 36 percent, due to a 28 percent increase in sales volume and higher average selling prices.
+Added: These two items positively impacted the change in net sales by $55.6 million and $15.7 million, respectively.
+Added: Sales volume of polyols used in rigid foam applications increased 23 percent during the first nine months of 2021 primarily due to the first quarter 2021 INVISTA polyester polyol acquisition and the gradual recovery from COVID-19 related delays of re-roofing and new construction projects.
+Added: Sales volume of polyols used in rigid foam applications, excluding the impact of the INVISTA acquisition, increased three percent.
+Added: Sales volume of phthalic anhydride and specialty polyols increased 40 percent and 39 percent, respectively, due to stronger demand within these markets following reduced demand in 2020 caused by the impacts of the COVID-19 pandemic.
+Added: The phthalic anhydride sales volume improvement was also attributable to the non-recurrence of the Millsdale, IL plant power outage in 2020.
+Added: Higher average selling prices were primarily due to the pass-through of higher raw material costs.
Net sales for European operations increased $126.0 million, or 117 percent, year-over-year.
−Removed: A 57 percent increase in sales volume and higher average selling prices positively impacted the change in net sales by $39.6 million and $35.5 million, respectively.
−Removed: The increase in sales volume is primarily due to the first quarter 2021 INVISTA polyester polyol business acquisition and the gradual recovery from COVID-19 related delays of re-roofing and new construction projects.
−Removed: Sales volume, excluding the impact of the INVISTA acquisition, increased 14 percent.
+Added: Higher average selling prices, a 52 percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $64.2 million, $56.4 million and $5.4 million, respectively.
+Added: The increase in sales volume is primarily due to the first quarter 2021 INVISTA polyester polyol business acquisition and the recovery from COVID-19 related delays of re-roofing and new construction projects.
+Added: Sales volume, excluding the impact of the INVISTA acquisition, increased seven percent.
The higher average selling prices were primarily due to the pass-through of higher raw material costs.
−Removed: The favorable impact of foreign currency translation positively impacted the change in net sales by $6.4 million.
−Removed: Net sales for Asia and Other operations increased $4.7 million, or 25 percent, due to the favorable impact of foreign currency translation, higher average selling prices and a seven percent increase in sales volume.
+Added: Net sales for Asia and Other operations increased $6.9 million, or 24 percent, due to the higher average selling prices, the favorable impact of foreign currency translation, and a four percent increase in sales volume.
These items positively impacted the change in net sales by $3.3 million, $2.6 million, and $1.0 million, respectively.
The higher average selling prices were primarily due to the pass-through of higher raw material costs.
−Removed: Polymer operating income for the first half of 2021 increased $17.9 million, or 78 percent, versus operating income for the first half of 2020.
+Added: Polymer operating income for the first nine months of 202 1 increased $1 5.3 million, or 34 percent, versus operating income for the first nine months of 20 20 .
Gross profit increased $1 7.9 million, or 27 percent, and operating expenses were up $ 2.6 million, or 1 3 percent , year-over-year.
Year-over-year comparisons of gross profit by region and total segment operating expenses and operating income follow:
−Removed: For the Six Months Ended
+Added: For the Nine Months Ended
(In thousands)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
Gross Profit and Operating Income
6 unchanged sentences
The higher sales volume positively impacted the year-over-year change in gross profit by $11.0 million.
−Removed: Higher average unit margins also positively impacted the change in gross profit by $2.1 million.
−Removed: A rapid rise in feedstock costs during the first half of 2021 resulted in lower average unit margins but this decline was more than offset by the non-recurrence of the of the first quarter 2020 power outage at the Company’s Millsdale, Illinois facility (which caused a temporary production shutdown and resulted in higher maintenance, supply chain costs and unit overhead rates).
+Added: Lower average unit margins negatively impacted the change in gross profit by $7.2 million.
+Added: The lower average unit margins primarily reflect higher feedstock costs, feedstock availability and supply chain inflationary pressures.
+Added: The unfavorable impact of the current year headwinds exceeded benefits from the non-recurrence of higher maintenance, supply chain costs and unit overhead rates incurred in 2020 as result of the power outage at the Company’s Millsdale, IL site and incremental raw material costs incurred in 2020 as a result of the Illinois River lock closures.
Gross profit for European operations increased $17.0 million, or 86 percent, due to a 52 percent increase in sales volume, higher average unit margins and the favorable impact of foreign currency translation.
1 unchanged sentence
Gross profit for Asia and Other operations declined $2.9 million, or 43 percent, primarily due to lower average unit margins that negatively impacted the change in gross profit by $3.5 million.
−Removed: The lower unit margins were partially due to the non-recurrence of a second quarter 2020 partial government reimbursement related to the government-mandated China JV shutdown in 2012 ($1.1 million).
−Removed: A seven percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the year-over-year change in gross profit by $0.3 million and $0.2 million, respectively.
+Added: The lower average unit margins were primarily due to the non-recurrence of $2.3 million of partial government settlements, related to the government-mandated China JV shutdown in 2012, received in the first nine months of 2020.
+Added: A four percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the year-over-year change in gross profit by $0.3 million each.
Operating expenses for the Polymers segment increased $2.6 million, or 13 percent, year-over-year.
+Added: The majority of the increase was due to higher salaries, the unfavorable impact of foreign currency translation and incremental expenses incurred in 2021 due to the INVISTA polyester polyol acquisition.
Specialty Products
−Removed: Net sales for the first half of 2021 increased $5.2 million, or 16 percent, versus net sales for the first half of 2020.
−Removed: This increase reflects sales volume growth of 11 percent and higher selling prices.
+Added: Net sales for the first nine months of 2021 increased $7.3 million, or 16 percent, versus net sales for the first nine months of 2020.
+Added: This increase reflects sales volume growth of 10 percent and higher average selling prices.
Gross profit and operating income increased $3.1 million and $3.2 million, respectively, year-over-year.
−Removed: The improvements in gross profit and operating income were primarily due to order timing differences within the food and flavor business and improved margins within the medium chain triglycerides (MCT) product line.
+Added: The improvements in gross profit and operating income were primarily due to order timing differences within the food and flavor business and improved volume within the medium chain triglycerides (MCT) product line.
Corporate Expenses
Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, increased $2.5 million between years.
−Removed: Corporate expenses were $39.1 million in the first half of 2021 versus $30.3 million in the first half of 2020.
−Removed: This increase was primarily attributable to higher deferred compensation expense ($4.5 million), acquisition-related expenses, insurance premiums, salaries and incentive-based compensation expenses, cloud application costs and corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) during the first half of 2021.
−Removed: The $4.5 million increase in deferred compensation expense was primarily due to a $0.95 per share increase in the market price of the Company’s common stock in the first half of 2021 compared to a $5.34 per share decrease in the first half of 2020.
−Removed: The following table presents the period-end Company common stock market prices used in the computation of deferred compensation expense/income for the six months ended June 30, 2021 and 2020:
+Added: Corporate expenses were $55.6 million in the first nine months of 2021 versus $53.0 million in the first nine months of 2020.
+Added: This increase was primarily attributable to higher acquisition-related expenses, insurance premiums, environmental remediation reserve expenses, salaries, cloud application costs and corporate headquarter-related expenses (inclusive of the non-recurrence of a sales and use tax refund received in the second quarter of 2020) during the first nine months of 2021.
+Added: Partially offsetting the above were lower deferred compensation and business restructuring expenses, which declined $2.6 million and $0.4 million, respectively, year-over-year.
+Added: Deferred compensation expense decreased $ 2.6 million between years.
+Added: This decrease was primarily due to a $ 6.38 per share decrease in the market price of the Company’s common stock in the first nine months of 202 1 compared to a $ 6.56 per share increase in the first nine months of 20 20 .
+Added: The following table presents the period-end Company common stock market prices used in the computation of deferred compensation expense /income for the nine months ended September 30, 202 1 and 20 20 :
Company Common Stock Price
LIQUIDITY AND CAPITAL RESOURCES
−Removed: For the six months ended June 30, 2021, operating activities were a cash source of $24.7 million versus a source of $58.5 million for the comparable period in 2020.
+Added: For the nine months ended September 30, 2021, operating activities were a cash source of $21.4 million versus a source of $141.7 million for the comparable period in 2020.
For the current year period, investing cash outflows totaled $306.0 million versus a cash outflow of $98.1 million in the prior year period.
1 unchanged sentence
Cash and cash equivalents decreased by $244.7 million compared to December 31, 2020, inclusive of a $3.0 million unfavorable foreign exchange rate impact.
−Removed: On June 30, 2021, the Company’s cash and cash equivalents totaled $127.1 million.
+Added: On September 30, 2021, the Company’s cash and cash equivalents totaled $105.3 million.
demand deposit accounts and money market funds totaled $20.5 million and $3.1 million, respectively.
The Company’s non-U.S.
−Removed: subsidiaries held $108.5 million of cash outside the United States as of June 30, 2021.
+Added: subsidiaries held $81.7 million of cash outside the United States as of September 30, 2021.
Operating Activity
Net income increased by $24.1 million versus the comparable period in 2020.
−Removed: Working capital was a cash use of $69.8 million during the first half of 2021 versus a use of $47.4 million for the comparable period in 2020.
−Removed: Accounts receivable were a use of $68.0 million during the first half of 2021 compared to a use of $23.3 million for the comparable period in 2020.
+Added: Working capital was a cash use of $121.7 million during the first nine months of 2021 versus a use of $23.2 million for the comparable period in 2020.
+Added: Accounts receivable were a use of $96.8 million during the first nine months of 2021 compared to a use of $28.4 million for the comparable period in 2020.
Inventories were a use of $63.8 million in 2021 versus a use of $2.6 million in 2020.
−Removed: Accounts payable and accrued liabilities were a source of $34.0 million in 2021 compared to a use of $8.3 million for the same period in 2020.
−Removed: Working capital requirements were higher in the first half of 2021 compared to 2020 primarily due to the changes noted above.
−Removed: The two major factors impacting all the working capital components were significantly higher raw material costs in 2021 versus 2020 and the impact of the first quarter 2021 acquisition of INVISTA’s polyester polyols business.
−Removed: I t is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2021 .
+Added: Accounts payable and accrued liabilities were a source of $39.2 million in 2021 compared to a source of $12.0 million for the same period in 2020.
+Added: Working capital requirements were higher in the first nine months of 2021 compared to 2020 primarily due to the changes noted above.
+Added: The major factors driving the increase in working capital in 2021 were significantly higher raw material costs, sales volume growth of four percent and significantly higher average selling prices.
+Added: It is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2021.
Investing Activity
Cash used for investing activities increased by $207.9 million year-over-year.
−Removed: In the first half of 2021, the Company acquired INVISTA’s aromatic polyester polyol business and associated asset for $184.6 million, net of cash received.
−Removed: During the first half of 2021, the Company also acquired a fermentation plant located in Lake Providence, Louisiana for $3.5 million.
−Removed: Cash used for capital expenditures was $74.9 million in the first half of 2021 versus $54.7 million for the comparable period in 2020.
+Added: In the first nine months of 2021, the Company acquired INVISTA’s aromatic polyester polyol business and associated asset for $183.7 million, net of cash received.
+Added: The Company also paid $0.8 million for a portion of the 2020 acquisition of Clariant’s Mexico anionic surfactant business.
+Added: During the first nine months of 2021, the Company also acquired a fermentation plant located in Lake Providence, Louisiana for $3.5 million.
+Added: Cash used for capital expenditures was $119.5 million in the first nine months of 2021 versus $84.9 million for the comparable period in 2020.
For 2021, the Company estimates that total capital expenditures will range from $200 million to $220 million including growth initiatives, infrastructure and optimization spending in the United States, Germany and Mexico.
+Added: The increase in the projected full year capital spending range is primarily attributable to a new alkoxylation plant the Company intends to build at its existing Pasadena, Texas site.
Financing Activity
Cash flow from financing activities was a source of $43.0 million in 2021 versus a use of $44.6 million in 2020.
−Removed: The year-over-year change is primarily due to $50.0 million of cash received from an unsecured private placement loan on June 10, 2021.
−Removed: The Company purchases shares of its common stock in the open market or from its benefit plans from time to time to fund its own benefit plans and to mitigate the dilutive effect of new shares issued under its compensation plans.
−Removed: The Company may, from time to time, seek to retire or purchase additional amounts of its outstanding equity and/or debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise, including pursuant to plans meeting the requirements of Rule 10b5-1 promulgated by the SEC.
+Added: The year-over-year change is primarily due to $100.0 million of cash received from the issuance of private placement notes during the first nine months of 2021.
+Added: The Company purchases shares of its common stock in the open market and from its benefit plans from time to time to fund its own benefit plans and to mitigate the dilutive effect of new shares issued under its compensation plans.
+Added: The Company may, from time to time, seek to purchase additional amounts of its outstanding equity and/or retire debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise, including pursuant to plans meeting the requirements of Rule 10b5-1 promulgated by the SEC.
Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors.
The amounts involved may be material.
−Removed: In the six months ended June 30, 2021, the Company purchased 82,045 shares of its common stock on the open market at a total cost of $10.9 million.
−Removed: As of June 30, 2021, there were 93,829 shares remaining under the current share repurchase authorization.
+Added: In the nine months ended September 30, 20 21 , the Company purchased 135,103 shares of its common stock on the open market at a total cost of $ 17.0 million.
+Added: As of September 30, 202 1 , there were 40,771 shares remaining under the then-existing share repurchase authorization.
+Added: On October 19, 2021, the Company’s Board of Directors authorized a new share repurchase program for up to $150.0 million of the Company’s common stock and terminated the prior share repurchase authorization.
Debt and Credit Facilities
−Removed: Consolidated balance sheet debt increased from $198.7 million on December 31, 2020 to $238.9 million on June 30, 2021, a $40.2 million increase, primarily due to higher domestic debt.
−Removed: 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 $263.0 million in the first half of 2021, from a negative $151.2 million to $111.8 million.
+Added: Consolidated balance sheet debt increased from $198.7 million on December 31, 2020 to $279.8 million on September 30, 2021, an $81.1 million increase, primarily due to higher domestic debt.
+Added: 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 $325.8 million in the first nine months of 2021, from a negative $151.2 million to $174.6 million.
This net debt change was due to a cash reduction of $244.6 million and a debt increase of $81.2 million.
−Removed: The cash reduction primarily reflects the first quarter 2021 acquisition of INVISTA’s aromatic polyester polyol business combined with higher capital expenditures and working capital requirements in the first half of 2021.
−Removed: As of June 30, 2021, the ratio of total debt to total debt plus shareholders’ equity was 18.6 percent compared to 16.8 percent on December 31, 2020.
−Removed: As of June 30, 2021, the ratio of net debt to net debt plus shareholders’ equity was 9.6 percent versus a negative 18.1 percent as of December 31, 2020 (see the “Reconciliation of Non-GAAP Net Debt” section in this MD&A for further details).
−Removed: On June 30, 2021, the Company’s debt included $234.4 million of unsecured notes, with maturities ranging from 2021 through 2028, which were issued to insurance companies in private placement transactions pursuant to note purchase agreements (the Note Purchase Agreements) and $4.5 million of foreign credit line borrowings.
−Removed: The proceeds from these note issuances have been the Company’s primary source of long-term debt financing and are supplemented by borrowings under bank credit facilities to meet short and medium-term liquidity needs.
−Removed: On June 10, 2021, the Company entered into a note purchase agreement pursuant to which it issued and sold $50 million in aggregate principal amount of Series 2021-A Notes.
+Added: The cash reduction was mostly due to the first quarter 2021 acquisition of INVISTA’s aromatic polyester polyol business combined with higher capital expenditures and working capital requirements in the first nine months of 2021.
+Added: As of September 30, 2021, the ratio of total debt to total debt plus shareholders’ equity was 20.9 percent compared to 16.8 percent on December 31, 2020.
+Added: As of September 30, 2021, the ratio of net debt to net debt plus shareholders’ equity was 14.2 percent versus a negative 18.1 percent as of December 31, 2020 (see the “Reconciliation of Non-GAAP Net Debt” section in this MD&A for further details).
+Added: On September 30, 2021, the Company’s debt included $270.0 million of unsecured notes with maturities ranging from 2021 through 2028, which were issued to insurance companies in private placement transactions pursuant to note purchase agreements (the Note Purchase Agreements), a $6 million loan from its revolving credit facility and $3.8 million of foreign credit line borrowings.
+Added: The proceeds from the note issuances have been the Company’s primary source of long-term debt financing and are supplemented by borrowings under bank credit facilities to meet short and medium-term liquidity needs.
+Added: On September 23, 2021, the Company entered into a note purchase agreement pursuant to which it issued and sold $50.0 million in aggregate principal amount of its Series 2021-B Notes.
+Added: The Series 2021-B Notes bear interest at a fixed rate of 2.37 percent, with interest to be paid semi-annually and with equal annual principal payments beginning on September 23, 2024 and continuing through final maturity on September 23, 2028.
+Added: The proceeds of the issuance of the Series 2021-B Notes are being used primarily for capital expenditures, to pay down existing debt and for other corporate purposes.
+Added: This note purchase agreement requires the maintenance of certain financial ratios and covenants that are substantially similar to the Company’s existing long-term debt and provides for customary events of default.
+Added: On June 10, 2021, the Company entered into a note purchase agreement pursuant to which it issued and sold $50.0 million in aggregate principal amount of its Series 2021-A Notes.
The Series 2021-A Notes bear interest at a fixed rate of 2.30 percent, with interest to be paid semi-annually and with equal annual principal payments beginning on June 10, 2024 and continuing through final maturity on June 10, 2028.
4 unchanged sentences
This unsecured facility is the Company’s primary source of short-term borrowings.
−Removed: As of June 30, 2021, the Company had
−Removed: outstanding letters of credit totaling $ 7.0 million under the revolving credit agreement and no borrowings, with $ 343.0 million remaining available.
+Added: As of September 30, 2021, the Company had outstanding letters of credit totaling $7.1 million under the revolving credit agreement and $6.0 million of borrowings, with $336.9 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.
−Removed: On June 30, 2021, the Company’s foreign subsidiaries had outstanding debt of $4.5 million.
−Removed: The Company is subject covenants under its material debt agreements that require the maintenance of minimum interest coverage and minimum net worth.
+Added: On September 30, 2021, the Company’s foreign subsidiaries had outstanding debt of $3.8 million.
+Added: The Company is subject to certain covenants under its 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 shares.
2 unchanged sentences
The Company is required to maintain a maximum net leverage ratio, as defined within the agreements, not to exceed 3.50 to 1.00.
−Removed: The Company is required to maintain net worth of at least $750.0 million.
+Added: The Company is required to maintain a net worth (as defined in the agreements) of at least $750.0 million.
The Company is permitted to pay dividends and purchase treasury shares after December 31, 2017, in amounts of up to $100.0 million plus 100 percent of net income and cash proceeds of stock option exercises, measured cumulatively beginning December 31, 2017.
The maximum amount of dividends that could have been paid within this limitation is disclosed as unrestricted retained earnings in Note 14, Debt , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).
−Removed: The Company believes it was in compliance with all of its debt covenants as of June 30, 2021.
+Added: The Company believes it was in compliance with all of its debt covenants as of September 30, 2021.
ENVIRONMENTAL AND LEGAL MATTERS
2 unchanged sentences
The Company will continue to invest in the equipment and facilities necessary to comply with existing and future regulations.
−Removed: During the first six months of 2021 and 2020, the Company’s expenditures for capital projects related to the environment were $5.5 million and $2.1 million, respectively.
+Added: During the first nine months of 2021 and 2020, the Company’s expenditures for capital projects related to the environment were $8.8 million and $4.2 million, respectively.
These projects are capitalized and depreciated over their estimated useful lives, which are typically 10 years.
−Removed: 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 $17.1 million and $17.6 million for the six months ended June 30, 2021 and 2020, respectively.
−Removed: Over the years, the Company has received requests for information related to or has been named by the government as a potentially responsible party a number of waste disposal sites where cleanup costs have been or may be incurred under CERCLA and similar state or foreign statutes.
+Added: 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 $24.8 million and $26.5 million for the nine months ended September 30, 2021 and 2020, respectively.
+Added: Over the years, the Company has received requests for information related to or has been named by the government as a potentially responsible party at a number of waste disposal sites where cleanup costs have been or may be incurred under CERCLA and similar state or foreign statutes.
In addition, damages are being claimed against the Company in general liability actions for alleged personal injury or property damage in the case of some disposal and plant sites.
4 unchanged sentences
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.
−Removed: After partial remediation payments at certain sites, the Company has estimated a range of possible environmental losses and legal losses of $22.5 million to $40.9 million at June 30, 2021, compared to $22.9 million to $41.1 million at December 31, 2020.
+Added: After partial remediation payments at certain sites, the Company has estimated a range of possible environmental losses and legal losses of $22.9 million to $41.3 million at September 30, 2021, compared to $22.9 million to $41.1 million at December 31, 2020.
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;
−Removed: these accruals totaled $22.5 million at June 30, 2021 and $22.9 million at December 31, 2020.
+Added: these accruals totaled $22.9 million at September 30, 2021 and $22.9 million at December 31, 2020.
Because the liabilities accrued are estimates, actual amounts could differ materially from the amounts recorded.
−Removed: Cash expenditures related to legal and environmental matters were $1.3 million for the six months ended June 30, 2021, compared to $3.1 million for the same period in 2020.
+Added: Cash expenditures for such reserved U.S.
+Added: environmental and legal matters were $2.5 million for the nine months ended September 30, 2021, compared to $3.8 million for the same period in 2020.
+Added: Cash expenditures for such reserved foreign environmental and legal matters were immaterial.
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.
2 unchanged sentences
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.
−Removed: 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.
+Added: Certain of these matters are discussed in Item 1, Part 2, of the Company’s Annual Report on Form 10-
+Added: 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 Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for a summary of the environmental proceedings related to certain environmental sites.
−Removed: Management believes that demand for Surfactant products sold into the Company’s institutional cleaning, agricultural and oilfield markets should improve versus 2020.
−Removed: However, management does not believe this higher demand will compensate for lower consumer consumption of cleaning, disinfection and personal wash products versus the pandemic peak in 2020.
+Added: Management believes that demand for Surfactant products sold into the institutional cleaning, agricultural and oilfield end markets should improve versus 2020.
+Added: However, management does not believe this higher demand will compensate for lower consumer consumption of cleaning, disinfection and personal wash products versus the COVID-19 pandemic peak in 2020.
Global demand for rigid polyols continues to recover from pandemic-related delays and cancellations of re-roofing and new construction projects.
−Removed: This recovery, combined with the first quarter 2021 acquisition of INVISTA’s aromatic polyester polyol business, should position the Company’s Polymer segment to deliver growth versus prior year.
+Added: This recovery, combined with the first quarter 2021 acquisition of INVISTA’s aromatic polyester polyol business, should position the Company’s Polymer segment to deliver growth versus the prior year.
Management believes the long-term prospects for the Polymer segment remain attractive as energy conservation efforts and more stringent building codes are expected to continue.
−Removed: Management believes its Specialty Product segment results will improve slightly year-over-year.
−Removed: Management remains cautiously optimistic about the remainder of the year despite continued raw material price increases, supply chain inflationary pressures and planned second half maintenance expenses.
+Added: Management believes its Specialty Products segment will improve slightly year-over-year.
+Added: Despite supply chain disruptions continuing to impact the Company, management remains optimistic about delivering full year earnings growth.
CRITICAL ACCOUNTING POLICIES
44 unchanged sentences
Reconciliation of Non-GAAP Adjusted Net Income and Earnings Per Share
−Removed: Management uses the non-GAAP adjusting net income metric to evaluate the Company’s operating performance.
−Removed: Management excludes the items listed in the table above because they are non-operational items.
+Added: Management uses the non-GAAP adjusted net income metric to evaluate the Company’s operating performance.
+Added: Management excludes the items listed in the table below because they are non-operational items.
The cumulative tax effect was calculated using the statutory tax rates for the jurisdictions in which the noted transactions occurred.
−Removed: Three Months Ended June 30
+Added: Three Months Ended September 30
(In millions, except per share amounts)
Net Income Attributable to the Company as Reported
−Removed: Deferred Compensation Expense (including
+Added: Deferred Compensation Expense (Income) (including
related investment activity)
−Removed: Business Restructuring Expense
−Removed: Cash-settled SARs Expense
+Added: Business Restructuring
+Added: Cash Settled Stock Appreciation Rights
+Added: Remediation Expense
Cumulative Tax Effect on Above Adjustment Items
Adjusted Net Income
−Removed: Six Months Ended June 30
+Added: Nine Months Ended September 30
(In millions, except per share amounts)
2 unchanged sentences
related investment activity)
−Removed: Business Restructuring Expense
−Removed: Cash-settled SARs (Income) Expense
+Added: Business Restructuring
+Added: Cash Settled Stock Appreciation Rights
+Added: Remediation Expense
Cumulative Tax Effect on Above Adjustment Items
3 unchanged sentences
(In millions)
+Added: September 30,
Current Maturities of Long-Term Debt as Reported
7 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.