What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-02-26 · 286 added, 277 removed, 1203 unchanged (32% of the section changed)

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The following statements and data are included in this item:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 34 )

Consolidated Statements of Income (For years ended December 31, 2021, 2020 and 2019)

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of:

Stepan Company

Northfield, Illinois

To the shareholders and Board of Directors of Stepan Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Stepan Company and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Stepan Company and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2022 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Changes in Accounting Principles

As discussed in Note 7 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended December 31, 2019, due to the adoption of ASU No.

2016-02, Leases (Topic 842), using the modified retrospective method.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Contingencies — Refer to Note 16 to the financial statements

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We evaluated the Company’s environmental contingencies disclosures for consistency with our knowledge of the Company’s environmental matters.

Acquisitions — Refer to Note 20 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Arteva Specialties B.V., INV Performance, LLC, INVISTA Textiles (U.K.) Limited, INV Management Services, LLC, and INVISTA Equities, LLC (collectively, “INVISTA”) to acquire INVISTA’s aromatic polyester polyol business and associated assets.

The acquisition has been accounted for under the acquisition method of accounting for business combinations.

The net purchase price was comprised of the $165.0 million cash purchase price paid to the seller and $21.6 million of working capital measured at its fair value as of the acquisition date.

Accordingly, the purchase price was allocated to the polyester polyol operations of the business using a discounted cash flow model.

Following, the operations allocation, the purchase price was then allocated to the assets acquired and liabilities assumed compromising the polyester polyol operations business based on their respective fair values, including $64.8 million in goodwill and $46.0 million in intangibles.

The operations allocation required management to make significant estimates and assumptions related to forecasts of future revenues and earnings before interest, taxes, depreciation, and amortization (EBITDA) and discount rates.

Given the operations allocation required management to make significant estimates and assumptions related to the forecasts of future costs, revenues, and EBITDA (the “forecasts”), as well as the selection of the discount rates, and considering the sensitivity of business assumptions used in the valuation, performing audit procedures to evaluate the reasonableness of the forecasts and selected discount rates required a high degree of auditor judgement and an increased extent of effort, including the need to involve fair value specialists.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the acquisition included the following, among others:

We tested the operating effectiveness of internal controls related to the Company’s review of the stock and asset purchase agreement, review of opening balances, purchase price allocation specific to property and intangible assets, and cash flow forecast determination.

We read and evaluated the purchase agreement and supporting schedules

We evaluated the identification of tangible and intangible assets and liabilities for completeness

We tested the classification of identifiable assets acquired and liabilities assumed in a business combination, including performing a sensitivity analysis on the intangible assets.

For the tangible assets subject to valuation, internal fair value specialists were engaged to assist with (1) evaluating the reasonableness of the valuation methodology and valuation assumptions with generally accepted valuation practices (2) evaluating whether multiple valuation techniques are appropriate in the circumstances and for which sufficient data is available, and (3) evaluating whether the valuation techniques are appropriate in relation to the business, industry, and environment.

With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates by (1) testing the source information underlying the determination of the discount rates and testing the mathematical accuracy of the calculation, (2) developing a range of independent estimates and comparing those to the discount rates selected by management, and (3) evaluating whether management’s forecasts were consistent with the evidence obtained in other areas of the audit.

We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in industry reports and other economic indicators.

We evaluated whether management’s forecasts were consistent with evidence obtained in other areas of the audit.

/s/ Deloitte & Touche LLP

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Research, development and technical services (Note 1)

Deferred compensation expense (income)

Business restructuring expenses (Note 22)

Deferred compensation expense (Note 12)

Business restructuring and loss on asset disposition (Note 22)

Operating Income

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Provision for Income Taxes (Note 9) \

Net (Gain) Loss Attributable to Noncontrolling Interest (Note 1)

Net (Income) Loss Attributable to Noncontrolling Interest (Note 1)

Net Income Attributable to Stepan Company

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Defined benefit pension plans:

Net actuarial gain (loss) arising in period (net of tax benefit of $ 265 , tax expense of $ 1,263 and tax benefit of $ 2,300 for 2020, 2019 and 2018, respectively)

Net actuarial gain (loss) arising in period (net of tax expense of $ 2,661 , tax benefit of $ 265 and tax expense of $ 1,263 for 2021, 2020 and 2019, respectively)

Amortization of prior service cost included in pension expense

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60,000,000 authorized shares;

issued 26,658,032 shares in 2020 and 26,493,335 shares in 2019

26,760,714 issued shares in 2021 and 26,658,032 issued shares in 2020

Additional paid-in capital

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Expenditures for property, plant and equipment

Proceeds from asset disposition

Asset acquisition (Note 20)

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Cash Flows From Financing Activities

Revolving debt and bank overdrafts, net

Other debt repayments

Revolving debt and bank overdrafts, net (Note 6)

Other debt borrowings (Note 6)

Other debt repayments (Note 6)

Dividends paid

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Stock option exercises

Net Cash Used In Financing Activities

Net Cash (Used In) Provided By Financing Activities

Effect of Exchange Rate Changes on Cash

Net Increase in Cash and Cash Equivalents

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

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Supplemental Cash Flow Information

Cash payments of income taxes, net of refunds

Cash payments of income taxes, net of refunds/payments

Cash payments of interest

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Reflects beginning retained earnings adjustment as a result of the Company’s first quarter 2019 adoption of ASU No.

2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory.

2018-02, Income Statement-Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Balance, December 31, 2020

Reflects beginning retained earnings adjustment as a result of the Company’s first quarter 2019 adoption of ASU No.

2018-02, Income Statement – Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Balance, December 31, 2021

Reflects the derecognition of noncontrolling interest due to the dissolution of the China joint venture.

See Note 1, Summary of Significant Accounting Policies , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K).

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Nature of Operations

Stepan Company (the Company) operations consist predominantly of the production and sale of specialty and intermediate chemicals, which are sold to other manufacturers for use in a variety of end products.

Stepan Company’s (the Company) operations consist predominantly of the production and sale of specialty and intermediate chemicals, which are sold to other manufacturers for use in a variety of end products.

Principal markets for all products are manufacturers of cleaning and washing compounds (including detergents, shampoos, fabric softeners, toothpastes and household cleaners), paints, cosmetics, food, beverages, nutritional supplements, agricultural products, plastics, furniture, automotive equipment, insulation and refrigeration.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires Company management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires Company management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses at the date of the financial statements and to provide disclosures of contingent assets, liabilities and related amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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Intercompany balances and transactions are eliminated in consolidation.

The Company has an 80 percent ownership interest in the Nanjing Stepan Jinling Chemical Limited Liability Company (a joint venture) and exercises controlling influence over the entity.

Therefore, Nanjing Stepan Jinling Chemical Limited Liability Company’s accounts are included in the Company’s consolidated financial statements.

The partner’s interest in the joint venture’s net income is reported in the net income attributable to noncontrolling interests line of the consolidated statements of income.

The partner’s interest in the net assets of the joint venture is reported in the noncontrolling interests line (a component of equity separate from Company equity) of the consolidated balance sheets.

Prior to the fourth quarter of 2021, the Company had an 80 percent ownership interest in the Nanjing Stepan Jinling Chemical Limited Liability Company (a joint venture) and exercised controlling influence over the entity.

As a result, the China joint venture results were included in the Company’s consolidated financial statements.

The partner’s interest in the joint venture’s net income was reported in the net income attributable to noncontrolling interest line of the consolidated statements of income and its interest in the net assets of the joint venture was reported in the noncontrolling interest line (a component of equity separate from Company equity) of the consolidated balance sheets.

The joint venture was dissolved during the fourth quarter of 2021.

Business Combinations

The Company makes acquisitions from time to time.

When such acquisitions occur, the Company applies the accounting guidance per FASB ASC Topic 805, Business Combinations (ASC 805), to determine whether the acquisition should be treated as an asset acquisition or a business combination.

When the acquisition meets the criteria of a business combination the Company recognizes the identifiable assets acquired and liabilities assumed at their estimated fair values as of the date of the acquisition.

The Company recognizes goodwill for any portion of the purchase price that exceeds the sum of the net fair value of all the assets purchased in the acquisition and the liabilities assumed.

Considerable estimates, complex judgments and assumptions are typically required to arrive at the fair value of elements acquired in a business combination, inclusive of discount rates, customer attrition rates, royalty rates, economic lives, and estimated future cash flows expected to be generated from the assets acquired.

These items are typically most relevant to the fair valuation of identifiable intangible assets and property, plant and equipment.

In some instances, the purchase price allocation of an acquisition is not complete by the end of a reporting period.

This situation most typically arises when an acquisition is complex and/or completed very close to the end of a reporting period and all necessary information is not available by the end of the reporting period in which the acquisition occurs.

In these instances, the Company reports provisional amounts for any incomplete items and makes subsequent adjustments as necessary information becomes available or determines that additional information is not obtainable.

Any subsequent adjustments could have a material impact on the Company’s financial condition or results of operations as they could impact the initial fair values assigned to intangible assets and property, plant and equipment and/or their estimated economic lives.

ASC 805 requires purchase price allocations to be finalized within one year from the acquisition date.

Cash and Cash Equivalents

The Company considers all highly liquid investments with purchased maturities of three months or less to be cash equivalents.

At December 31, 2020, the Company’s cash and cash equivalents totaled $ 349.9 million including $ 123.7 million in money market funds, each of which was rated AAAm by Standard and Poor’s, Aaa-mf by Moody’s and AAAmmf by Fitch.

demand deposit accounts totaled $ 76.1 million and cash of the Company’s non-U.S.

At December 31, 2021, the Company’s cash and cash equivalents totaled $ 159,186,000 including $ 46,689,000 in money market funds, each of which was rated AAAm by Standard and Poor’s, Aaa-mf by Moody’s and AAAmmf by Fitch.

demand deposit accounts totaled $ 25,253,000 and cash of the Company’s non-U.S.

subsidiaries held outside the U.S.

totaled $ 150.1 million as of December 31, 2020.

totaled $ 87,244,000 as of December 31, 2021.

At December 31, 2020, the Company’s cash and cash equivalents totaled $ 349,938,000 including $ 123,695,000 in money market funds, each of which was rated AAAm by Standard and Poor’s, Aaa-mf by Moody’s and AAAmmf by Fitch.

deposit accounts totaled $ 76,164,000 and cash of the Company’s non-U.S.

subsidiaries held outside the U.S.

totaled $ 150,079,000 as of December 31, 2020.

Receivables and Credit Risk/Losses

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Level 3 - unobservable inputs which reflect the entity’s own assumptions about the assumptions market participants use in pricing the assets and liabilities.

The Company also applies the fair value measurement requirements to nonrecurring fair value measurements of nonfinancial assets and liabilities recorded in conjunction with business combinations and as part of impairment reviews for goodwill and other long-lived assets.

The Company applies the fair value measurement provisions of GAAP to any of its financial assets and liabilities that are carried at fair value on the consolidated balance sheets (see Note 2, Fair Value Measurements , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) ), its outstanding debt for disclosure purposes (see Note 2, Fair Value Measurements , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) ) and its pension plan assets (see Note 13, Postretirement Benefit Plans , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) ).

The Company also applies fair value measurements to nonfinancial assets and liabilities recorded in conjunction with business combinations and as part of impairment reviews for goodwill and other long-lived assets.

Revenue Recognition

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As such, shipping and handling fees billed to customers in a sales transaction are recorded in Net Sales and shipping and handling costs incurred are recorded in Cost of Sales.

Volume and cash discounts due customers are estimated and recorded in the same period as the sales to which the discounts relate and are reported as reductions of revenue in the consolidated statements of income.

See Note 21 to the consolidated financial statements for more details.

Volume and cash discounts due customers are estimated and recorded in the same period as the sales to which the discounts relate and are reported as reductions of revenue in the consolidated

statements of income.

See Note 21 , Revenue from Contracts with Customers , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for more details.

Cost of Sales

Cost of sales comprises raw material costs (including inbound freight expense to deliver the raw materials), manufacturing plant labor expenses and various manufacturing overhead expenses, such as utility, maintenance, operating supply, amortization and manufacturing asset depreciation expenses.

Cost of sales is comprised of raw material costs (including inbound freight expense to deliver the raw materials), manufacturing plant labor expenses and various manufacturing overhead expenses, such as utilities, maintenance, operating supplies, amortization and manufacturing asset depreciation expenses.

Cost of sales also includes outbound shipping and handling expenses, inter-plant transfer costs, warehouse expenses and rail car rental expenses.

Operating Expenses

Selling expense comprises salary and the related fringe benefit expenses for marketing and sales personnel and operating costs, such as outside agent commissions, automobile rental and travel-related expenses, which support the sales and marketing functions.

Selling expense is comprised of salaries and related fringe benefit expenses for marketing and sales personnel and operating costs, such as outside agent commissions, automobile rental and travel-related expenses, which support the sales and marketing functions.

Bad debt charges and any depreciation expenses related to marketing assets (e.g., computers) are also classified as selling expense.

Administrative expense comprises salary and the related fringe benefit expenses and operating costs for the Company’s various administrative functions, which include information services, finance, legal, and human resources.

Administrative expense is comprised of salaries and related fringe benefit expenses and operating costs for the Company’s various administrative functions, which include information services, finance, legal, and human resources.

The majority of environmental remediation expenses are also classified as administrative expense.

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Total research and development expenses were $ 38,778,000 , $ 35,999,000 , and $ 34,139,000 in 2021, 2020 and 2019, respectively.

The remainder of research, development and technical service expenses reflected on the consolidated statements of income relates to technical services, which include routine product testing, quality control and sales support service.

Compensation expense or income related to the Company’s deferred compensation plans is presented in the deferred compensation expense (income) line in the Consolidated Statements of Income.

For more details, see Note 12 to consolidated financial statements.

The remainder of research, development and technical service expenses reflected on the consolidated statements of income relate to technical services, which include routine product testing, quality control and sales service support.

Compensation expense or income related to the Company’s deferred compensation plans is presented in the deferred compensation expense line in the Consolidated Statements of Income.

For more details, see Note 12, Deferred Compensation, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) .

Environmental Expenditures

Environmental expenditures that relate to current operations are expensed in cost of sales.

Environmental expenditures that relate to current operations are typically recorded in cost of sales.

Expenditures that mitigate or prevent environmental contamination and that benefit future operations are capitalized as assets and depreciated on a straight-line basis over the estimated useful lives of the assets, which are typically 10 years.

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Some of the factors on which the Company bases its estimates include information provided by feasibility studies, potentially responsible party negotiations and the development of remedial action plans.

Legal costs related to environmental matters are expensed as incurred (see Note 16 for environmental contingencies).

Legal costs related to environmental matters are expensed as incurred.

See Note 16, Contingencies , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for environmental contingencies details.

Goodwill and Other Intangible Assets

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patents – 15 years;

non-compete agreements – three - five years ;

trademarks – five- 11 years;

customer relationships – five - 20 years ;

know-how – 5 - 20 years and supply contracts - four years .

non-compete agreements – three years ;

trademarks – eight to 11 years ;

customer relationships – 12 to 20 years and know-how – seven to 20 years .

In addition, finite-life intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying value of an intangible asset may not be recoverable.

Goodwill is not amortized but is tested for impairment at least annually, or more frequently, if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit to which goodwill relates below the reporting unit’s carrying value.

See Note 4 for detailed information about goodwill and other intangible assets.

See Note 4, Goodwill and Other Intangibles , of

the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for detailed information about goodwill and other intangible assets.

Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

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Accrued interest and penalties are included within the related tax liability line in the Consolidated Balance Sheet.

See Note 9 for more information about the Company’s income taxes.

See Note 9 , Income Taxes , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for more information about the Company’s income taxes.

Translation of Foreign Currencies

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Gains or losses on foreign currency transactions are reflected in the other, net caption of the consolidated statements of income.

The Company has three foreign subsidiaries whose functional currencies are the U.S.

For these subsidiaries, nonmonetary assets and liabilities are translated at historical rates, monetary assets and liabilities

are translated at exchange rates in effect at year end, revenues and expenses are translated at average exchange rates for the year and translation gains and losses are included in the other, net caption of the consolidated statements of income.

The Company has four foreign subsidiaries whose functional currencies are the U.S.

For these subsidiaries, nonmonetary assets and liabilities are translated at historical rates, monetary assets and liabilities are translated at exchange rates in effect at year end, revenues and expenses are translated at average exchange rates for the year and translation gains and losses are included in the other, net caption of the consolidated statements of income.

Stock-Based Compensation

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Compensation expense for the stock-settled SARs is calculated in the same way as compensation expense for stock options.

See Note 11 for detailed information about the Company’s stock-based compensation.

See Note 11, Stock-based Compensation , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for detailed information about the Company’s stock-based compensation.

Earnings Per Share

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Diluted earnings per share amounts are based on the weighted-average number of common shares outstanding plus the weighted-average of net common shares (under the treasury stock method) that would be outstanding assuming the exercise of outstanding stock options and stock-settled SARs, the vesting of unvested stock awards that have no performance or market condition and the issuance of contingent performance stock awards.

See Note 18 for detailed information about the Company’s earnings per share calculations.

See Note 18, Earnings Per Share , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for detailed information about the Company’s earnings per share calculations.

Comprehensive Income and Accumulated Other Comprehensive Income

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Accumulated other comprehensive income (AOCI) is reported as a component of stockholders’ equity in the Company’s consolidated balance sheets.

See Note 19 for detailed information regarding changes in the Company’s AOCI and reclassifications out of AOCI to income.

See Note 19, Accumulated Other Comprehensive Income (Loss) , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for detailed information regarding changes in the Company’s AOCI and reclassifications out of AOCI to income.

Segment Reporting

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Enterprise-wide financial information about the geographic locations in which the Company earns revenues and holds assets is also disclosed.

See Note 17 for detailed information about the Company’s segment reporting.

See Note 17, Segment Reporting , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for detailed information about the Company’s segment reporting.

Derivative Instruments

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Company policy prohibits the use of derivative instruments for trading or speculative purposes.

See Note 3 for further information regarding the Company’s use of derivatives.

See Note 3, Derivative Instruments , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for further information regarding the Company’s use of derivatives.

At December 31, 2021, the Company held open forward contracts for the purchase of 1.4 million dekatherms of natural gas in 2022 at a cost of $ 5,712,000 .

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Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which amends the guidance on the measurement of the impairment of financial instruments.

The new pronouncement replaces the existing model of measuring credit losses with an expected credit loss model referred to as “the Current Expected Credit Loss (CECL) model.” The new model is based on expected losses that should be measured based not only on historical experience but on the combination of historical data, current conditions and reasonable forecasts.

Under this methodology, an entity recognizes as an allowance its estimate of lifetime expected credit losses and is required to apply the new credit loss model to most financial instruments held at amortized cost including trade receivables.

The Company adopted ASU No.

2016-13 in the first quarter of 2020.

The adoption of the guidance in ASU No.

2016-13 did not have a material effect on the Company’s financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU No.

2017-4, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment , which eliminates Step 2 from the goodwill impairment test.

When an indication of impairment was identified after performing the first step of the goodwill impairment test, Step 2 required that an entity determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) using the same procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Under the amendments in ASU No.

2017-4, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value.

An entity would recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value.

In addition, an entity must consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

The Company adopted the amendments in ASU No.

2017-4 for its annual, or any interim, goodwill impairment tests in the first quarter of 2020.

The adoption of the guidance in ASU No.

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

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement .

This update modifies some disclosure requirements related to fair value measurements used for different levels of instruments in fair value hierarchy (Level 1, Level 2 and Level 3).

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

The Company adopted ASU No.

2018-13 in the first quarter of 2020 and the adoption of this update did not have an effect on the Company’s financial position, results of operations, cash flows or the disclosures made for fair value measurements used by the Company.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles-Goodwill and Other-Internal-Use software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract .

This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

This update requires the entity to determine which implementation costs to capitalize as an asset related to the service contact and which costs to expense over the term of the hosting contract.

The Company adopted ASU N0 2018-15 prospectively in the first quarter of 2020.

The adoption of ASU No.

2018-15 did not have a material impact on the Company’s financial position, results of operations and cash flows.

In August 2018, the FASB issued ASU No.

2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20) .

This update removes some disclosures that are no longer considered cost beneficial and adds some disclosures about defined benefit plans that have been identified as relevant.

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

The early adoption is permitted.

The Company adopted ASU No.

2018-14 in 2020 and the adoption did not have an effect on the Company’s financial position, results of operations and cash flows, but impacted the disclosures made for the Company’s defined benefit retirement plans.

In December 2019, the FASB issued ASU No.

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

The adoption of this update will not have a material effect on the Company’s financial position, results of operations and cash flows.

The adoption of this update did not have a material effect on the Company’s financial position, results of operations and cash flows.

In March 2020, the FASB issued ASU No.

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The guidance should be applied prospectively.

The guidance is effective beginning on March 12, 2020 through December 31, 2022.

The Company has not utilized any of the optional expedients of exceptions available under this ASU.

The Company has not currently utilized any of the optional expedients of exceptions available under this ASU.

The Company will continue to assess whether this ASU is applicable throughout the effective period.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which improves the accounting for acquired revenue contracts with customers in a business combination by addressing current inconsistencies in recognition of an acquired contract liabilities as well as payment terms and their effect on subsequent revenue recognized by the acquirer.

Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with ASU No.

2014-09 , Revenue from Contracts with Customers (Topic 606) at fair value on the acquisition date.

This amendment requires acquiring entities to apply Topic

606 to recognize and measure contract assets and contract liabilities in a business combination.

The amendments in this update are effective for fiscal years beginning after December 31, 2022 and should be applied prospectively.

The Company is in the process of assessing the impact that adoption of ASU No.

2021-08 may have on its financial position, results of operations and cash flows.

Fair Value Measurements

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Derivative assets and liabilities

Derivative assets and liabilities include the foreign currency exchange contracts discussed in Note 3.

Derivative assets and liabilities include the foreign currency exchange contracts discussed in Note 3, Derivative Instruments , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) .

Fair value and carrying value were the same because the contracts were recorded at fair value.

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Long-term investments

Long-term investments included the mutual fund assets the Company held to fund a portion of its deferred compensation liabilities and all of its non-qualified supplemental executive defined contribution obligations (see the defined contribution plans section of Note 13).

Long-term investments include the mutual fund assets the Company held to fund a portion of its deferred compensation liabilities and all of its non-qualified supplemental executive defined contribution obligations.

See the defined contribution plans section of Note 13, Postretirement Benefit Plans , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) .

Fair value and carrying value were the same because the mutual fund assets were recorded at fair value in accordance with the FASB’s fair value option guidance.

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Debt obligations

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

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

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

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dollar equivalent of $ 51,542,000 and $ 48,336,000 , respectively.

The fair values of the derivative instruments held by the Company on December 31, 2020, and December 31, 2019, are disclosed in Note 2.

The fair values of the derivative instruments held by the Company on December 31, 2021, and December 31, 2020, are disclosed in Note 2, Fair Value Measurements , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) .

Derivative instrument gains and losses for the years ended December 31, 2021, 2020 and 2019, were immaterial.

For amounts reclassified out of AOCI into earnings for the years ended December 31, 2020, 2019 and 2018, see Note 19.

For amounts reclassified out of AOCI into earnings for the years ended December 31, 2021, 2020 and 2019, see Note 19, Accumulated Other Comprehensive Income (Loss ), of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) .

Goodwill and Other Intangible Assets

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Goodwill, net

See Note 20 for information regarding the goodwill acquired in a business combination.

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

The Company tests its goodwill balances for impairment in the second quarter of each calendar year.

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The 2020 balances include intangible assets acquired as part of the Company’s Clariant (Mexico) and Logos Technologies acquisitions in 2020.

See Note 20 for additional details.

The 2021 balances include intangible assets acquired as part of the Company’s INVISTA acquisition in January 2021.

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

Aggregate amortization expense for the years ended December 31, 2021, 2020 and 2019, was $ 7,292,000 , $ 3,621,000 , and $ 3,399,000 , respectively.

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$ 108 for 2021 and 2020 respectively)

2.30% (net of unamortized debt issuance cost of $ 100 and

$ 0 for 2021 and 2020, respectively)

2.37% (net of unamortized debt issuance cost of $ 108 and

$ 0 for 2021 and 2020, respectively)

2.73% (net of unamortized debt issuance cost of $ 22 and

$ 0 for 2021 and 2020, respectively)

Debt of foreign subsidiaries

Unsecured bank debt, foreign currency

Less current maturities

Long-term debt

The Company’s long-term debt financing is currently composed of unsecured private placement notes issued to insurance companies, totaling $ 199,286,000 as of December 31, 2020.

The Company’s long-term debt financing is currently comprised of certain unsecured private placement notes issued to insurance companies, totaling $ 360,719,000 as of December 31, 2021.

These notes are denominated in U.S.

dollars and have fixed interest rates ranging from 2.30 percent to 4.86 percent.

The notes had original maturities of 12 years with mandatory amortization of principal beginning six years after issuance.

The notes had original maturities of seven to 12 years with mandatory amortization of principal beginning four, five and six years after issuance.

The Company will be required to make amortization payments on the currently outstanding notes from 2022 to 2031.

On June 10, 2021, the Company entered into the Prudential note purchase agreement pursuant to which it issued and sold $ 50,000,000 in aggregate principal amount of its Series 2021-A Notes.

The Series 2021-A Notes bear interest at a fixed rate of 2.30 %, 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 .

On December 10, 2021, pursuant to the Prudential note purchase agreement, the Company issued and

sold $ 50,000,000 in aggregate principal amount of its Series 2021-D Notes.

The Series 2021-D Notes bear interest at a fixed rate of 2.73 %, with interest to be paid semi-annually and with equal annual principal payments beginning on December 10, 2025 and continuing through final maturity on December 10, 2031.

On June 10, 2021, the Company entered into the NYL note purchase agreement pursuant to which, on September 23, 2021, the Company issued and sold $ 50,000,000 in aggregate principal amount of its Series 2021-B Notes.

The Series 2021-B Notes bear interest at a fixed rate of 2.37 % 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 .

On December 10, 2021, pursuant to the NYL note purchase agreement, the Company issued and sold $ 50,000,000 in aggregate principal amount of its Series 2021-C Notes.

The Series 2021-C Notes bear interest at a fixed rate of 2.73 % with interest to be paid semi-annually and with equal annual principal payments beginning on December 10, 2025 and continuing through final maturity on December 10, 2031 .

The proceeds of the issuance of the Series 2021-A Notes, Series 2021-B Notes, Series 2021-C Notes and Series 2021-D Notes are being used for capital expenditures, to pay down existing debt and for other corporate purposes.

The Prudential note purchase agreement and the NYL note purchase agreement require the maintenance of certain financial ratios, contain covenants that are substantially similar to the Company’s existing long-term debt and provide for customary events of default.

The Company has a committed $ 350,000,000 multi-currency revolving credit agreement that expires on January 30, 2023 .

The Company maintains standby letters of credit under its workers’ compensation insurance agreements and for other purposes, as needed from time to time, which are issued under the revolving credit agreement.

As of December 31, 2020, the Company had outstanding letters of credit totaling $ 6,220,000 and no borrowings under the revolving credit agreement.

The Company maintains import letters of credit and standby letters of credit under its workers’ compensation insurance agreements and for other purposes, as needed from time to time, which are issued under the revolving credit agreement.

As of December 31, 2021, the Company had outstanding letters of credit totaling $ 6,720,000 and no outstanding borrowings under the revolving credit agreement.

There was $ 343,280,000 available under the revolving credit agreement as of December 31, 2021.

Loans under the credit agreement may be incurred, at the discretion of the Company, with terms to maturity of one to six months.

Loans under the credit agreement may be incurred, at the discretion of the Company, with terms to maturity of one month, three months or six months .

The Company may choose from two interest rate options:

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The credit agreement requires the maintenance of certain financial ratios and compliance with certain other covenants that are similar to the Company’s existing debt agreements, including net worth, interest coverage and leverage financial covenants and limitations on restricted payments, indebtedness and liens.

The Company’s foreign subsidiaries had no unsecured debt at December 31, 2020.

The Company’s foreign subsidiaries had $ 2,861,000 of unsecured debt at December 31, 2021.

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

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Debt maturing in 2022 includes $ 37,857,000 of scheduled repayments under long-term debt agreements.

Although the Company’s foreign subsidiaries currently have no short-term working capital loans,

these types of loans routinely exist .

The Company’s foreign subsidiaries routinely have short-term working capital loans .

These short-term loan agreements could be supplemented, if necessary, by the Company’s $ 350,000,000 revolving credit agreement entered into on January 30, 2018.

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Interest expense, net

The Company adopted ASU No.

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

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

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

The most significant impact of adopting ASU No.

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

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

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

The Company elected to apply the new lease standard at adoption (January 1, 2019) as allowed under ASU No.

2018-11 and, as a result, the Company did not retrospectively adjust prior periods presented.

The Company elected the practical expedient to not separate non-lease components from lease components for all asset classes and the practical expedient which permits a Company to not reassess prior conclusions about lease identification, lease classifications and initial direct costs.

The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company.

In addition, the Company made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet.

Upon adoption of ASC 842, the Company recognized $ 42,400,000 of ROU assets and related operating lease liabilities on its balance sheet.

There was no cumulative catch-up adjustment made to beginning retained earnings.

Significant judgments used by the Company to determine whether a contract is or contains a lease include:

(i) determining whether any explicitly or implicitly identified assets have been identified in the contract and (ii) determining whether the Company obtains substantially all of the economic benefits from the use of an underlying asset and directs how and for what purpose the asset is used during the term of the contract.

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

Railcars and real estate comprise approximately 26 percent and 56 percent, respectively, of the Company’s consolidated ROU asset balance.

The Company’s operating leases are primarily comprised of real estate, railcar, storage tank, warehouse, auto, trailer and manufacturing/office equipment leases.

Real estate and railcars comprise approximately 60 percent and 25 percent, respectively, of the Company’s consolidated right of use (ROU) asset balance.

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

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

The Company’s three principal real estate leases relate to the office lease for the new corporate headquarters in Northbrook, Illinois and land leases in the Philippines and Singapore.

estate lease terms typically range from one to fifty years .

The Company’s four principal real estate leases consist of the office lease for the corporate headquarters in Northbrook, Illinois and land leases in the Philippines, Singapore and Lake Providence, Louisiana .

As of December 31, 2021, the Company had railcar and storage tank leases valued at approximately $ 1,208,000 , that had not commenced.

These leases will commence in the first quarter of 2022.

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

IBRs were specifically determined for the United States, the Philippines, Singapore, Brazil and China, typically for five-year increments.

IBRs were specifically determined for the United States, Philippines, Singapore, Brazil and China, typically for five-year increments.

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

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

The lease cost is included in Cost of sale and Operating expenses sections of the Consolidated Statements of Income.

Lease cost is recognized in both the Cost of Sales and Operating Expenses sections of the Consolidated Statements of Income.

(In thousands)

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Operating cash flow from operating leases

Right-of-use assets obtained in exchange for new operating lease liabilities

Right-of-use assets obtained in exchange for operating lease liabilities

The following table outlines maturities of lease liabilities as of December 31, 2021:

(In thousands)

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Investment income

Realized and unrealized gains (losses) on investments

Realized and unrealized gains on investments

Net periodic benefit cost

Gain on sale of asset

Other retirement obligation

Gain on sale of asset

Gain on dissolution of the China joint venture

The provisions for taxes on income and the related income before taxes for the years ended December 31, 2021, 2020 and 2019, were as follows:

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Unrecognized tax benefits

Nontaxable foreign interest income

tax reform, net impact (3)

Change in accounting methods (4)

Prior years return to provision true-up (3)

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Includes cost of global intangible low-taxed income (GILTI) in 2021, 2020 and 2019 plus other taxes paid or withheld on cash repatriated from foreign countries in 2021, 2020 and 2019.

Does not include state tax impacts, which are included in state income tax provision, less applicable federal tax benefit.

For 2018, amount represents the federal tax rate change due to certain accounting methods that were adopted on the 2017 federal income tax return.

For 2019, amount i ncludes incremental federal research credits for 2015 - 2019 that were identified as part of a research and development tax credit study.

For 2021, includes the benefit of separate limitation loss foreign tax credit attributes, related to prior years, that were utilized in 2021.

For 2021, amount resulted from a higher federal research credit, higher foreign-derived intangible income (FDII), and lower GILTI related to the 2020 tax year.

For 2019, amount includes incremental federal research credits for 2015 - 2019 that were identified as part of a research and development tax credit study.

Also includes a federal tax rate change due to the classification of certain 2016 and 2017 depreciable fixed assets as deductible research costs.

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(In thousands)

Deferred Tax Liabilities:

Unrealized foreign exchange loss

Amortization of intangibles

Deferred Tax Assets:

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subsidiaries net operating loss carryforwards

Amortization of intangibles

Tax credit carryforwards

Deferred Tax Liabilities:

Unrealized foreign exchange loss

Amortization of intangibles

Valuation Allowance

Net Deferred Tax Liabilities

Net Deferred Tax Assets (Liabilities)

Reconciliation to Consolidated Balance Sheet:

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Non-current deferred tax liabilities

Net Deferred Tax (Liabilities) Assets

Net Deferred Tax Assets (Liabilities)

Earnings generated by a foreign subsidiary are presumed to ultimately be transferred to the parent company.

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or earnings that would qualify for the 100 percent dividends received deduction provided for in the Tax Act as long as such distributions would not result in any significant foreign taxes.

In 2021, the Company repatriated $ 15,340,000 between May and December from its Brazilian, Colombian, and Mexican subsidiaries.

The Company did not incur any incremental taxes as a result of this repatriation.

In anticipation of the INVISTA acquisition, the Company’s Philippines entities declared a cash dividend of approximately $ 20,700,000 to the U.S.

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The Company recorded $ 2,384,000 of additional income tax expense in 2020 as a result of the expected repatriation.

The Company expects that the U.S.

parent will receive the cash in 2021.

The Company’s U.S.

parent received the cash in 2021.

The effect of the adjustment on the 2020 effective tax rate was an increase of approximately 1.4 percent.

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The Company does not consider the undistributed earnings of its Canadian subsidiary to be indefinitely reinvested in foreign operations to the extent of the subsidiary’s paid-up capital (PUC) as determined under Canadian tax law which is used to determine tax-free distributions for Canadian tax purposes.

The Company also does not consider the undistributed earnings of one of its Dutch subsidiaries, one of its Singapore subsidiaries, and one of its Chinese subsidiaries to be indefinitely reinvested in foreign operations.

The Company also does not consider the undistributed earnings of one of its Dutch subsidiaries, and one of its Singapore subsidiaries to be indefinitely reinvested in foreign operations.

A distribution from any of these subsidiaries should not result in any significant foreign taxes to the extent of the distribution limitations discussed above and therefore, the Company has not recognized a deferred tax liability for these undistributed earnings as of December 31, 2021.

The Company considers the undistributed earnings of its remaining foreign subsidiaries to be indefinitely reinvested in foreign operations.

In 2021, the Company dissolved its China joint venture that prior to dissolution had not been considered indefinitely reinvested.

The dissolution resulted in $ 142,000 of additional income tax expense in 2021.

The Company considers the undistributed earnings of

its remaining foreign subsidiaries to be indefinitely reinvested in foreign operations.

At this time, the determination of deferred tax liabilities on this amount is not practicable .

The Company has non-U.S.

The Company had non-U.S.

tax loss carryforwards of $ 3,351,000 (pretax) as of December 31, 2021, and $ 6,551,000 as of December 31, 2020, that are available for use by the Company between 2022 and 2029.

The Company has tax credit carryforwards of

$ 4,713,000 as of December 31, 2020, and $ 5,200,000 as of December 31, 2019 that are available for use by the Company between 202 1 and 2034.

The Company has non-U.S.

The Company had tax credit carryforwards of $ 2,829,000 as of December 31, 2021, and $ 4,713,000 as of December 31, 2020, that are available for use by the Company between 2022 and 2034.

The Company had non-U.S.

capital loss carryforwards of $ 638,000 as of December 31, 2021, and $ 633,000 as of December 31, 2020.

The Company’s capital loss carryforwards do not expire.

As of December 31, 2020, and 2019, the Company had valuation allowances of $ 896,000 and $ 2,994,000 , respectively, which were attributable to deferred tax assets in Canada, China, India, and the Philippines.

As of December 31, 2021, and 2020, the Company had valuation allowances of $ 862,000 and $ 896,000 , respectively, which were attributable to deferred tax assets in Canada, India, the Philippines and Singapore.

The realization of deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions.

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The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

In 2020, the Company recognized net interest and penalty expense of $ 31,000 compared to $ 19,000 of net interest and penalty expense in 2019 and $ 26,000 of net interest and penalty income in 2018.

In 2021, the Company recognized net interest and penalty expense of $ 260,000 compared to $ 31,000 of net interest and penalty expense in 2020 and $ 19,000 of net interest and penalty expense in 2019.

At December 31, 2021 the liability for interest and penalties was $ 340,000 compared to $ 80,000 at December 31, 2020.

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states jurisdictions may be subject to examination back to 2014.

During 2016, the Internal Revenue Service started its audit of the 2011 and 2012 tax years.

As of December 31, 2019, these audits were officially settled.

During 2018, the Company effectively settled these audits and reversed an unrecognized tax benefit of $ 1,526,000 that was offset with a corresponding reversal of $ 1,326,000 related to an income tax refund receivable for which the Company is no longer entitled to receive.

During 2021, the Internal Revenue Service started its audit of the 2016-2019 tax years.

As of December 31, 2021, these audits were still open and the Company had not been notified of any significant proposed adjustments.

Below are reconciliations of the January 1 and December 31 balances of unrecognized tax benefits for 2021, 2020 and 2019:

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Stock-based Compensation

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

On December 31, 2021, the Company had outstanding stock options, stock awards and stock appreciation rights (SARs) awarded under its 2011 Incentive Compensation Plan (2011 Plan).

Stock options, stock awards and SARs are currently granted to Company executives and other key employees.

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Compensation expense recorded in the consolidated statements of income for all plans was $ 11,716,000 , $ 10,080,000 , and $ 8,872,000 for the years ended December 31, 2021, 2020 and 2019, respectively.

The increase in stock-based compensation in 2020 versus 2019 was primarily due to the increase in compensation expenses related to performance awards.

Management’s assessment

that higher profitability performance targets for certain grants would be achieved led to the increase of compensation expenses for performance awards.

Partially offsetting the increase was the decrease in compensation expenses related to cash SARs.

The $ 16.88 per share increase in the market value of the Company common stock from $ 102.44 at December 31, 2019 to $ 119.32 at December 31, 2020 was smaller than the increase of $ 28.44 per share in the market value of the Company common stock from $ 74.00 at December 31, 2018 to $ 102.44 at December 31, 2019.

The increase in stock-based compensation in 2021 versus 2020 was primarily due to higher compensation expenses related to performance awards.

Management’s assessment that higher profitability performance targets for certain grants would be achieved led to the increase of compensation expenses for performance awards.

The total income tax benefit recognized in the income statement for share-based compensation arrangements was $ 2,867,000 , $ 2,390,000 , and $ 1,501,000 for the years ended December 31, 2021, 2020 and 2019, respectively.

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Unvested at January 1, 2021

Forfeited/Modified due to change of assumptions

Unvested at December 31, 2021

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therefore, fluctuations in the market price of the underlying Company stock do not affect earnings.

The additional compensation expense or income resulting from the changes in the market values and earnings of the selected investment options was $ 9,988,000 expense in 2020, $ 15,140,000 expense in 2019 and $ 2,329,000 income in 2018.

The main factor in the decrease of the 2020 deferred compensation expense versus 2019 deferred compensation expense was a $ 16.88 per share increase in the market price of the Company’s common stock in 2020 versus a $ 28.44 per share increase in the price of stock in 2019.

The additional compensation expense or income resulting from the changes in the market values and earnings of the selected investment options was $ 6,895,000 expense in 2021, $ 9,988,000 expense in 2020 and $ 15,140,000 expense in 2019.

The main factor in the decrease of the 2021 deferred compensation expense versus 2020 deferred compensation expense was a $ 4.97 per share decrease in the market price of the Company’s common stock in 2021 versus a $ 16.88 per share increase in the price of stock in 2020.

The Company’s deferred compensation liability was $ 61,219,000 and $ 61,558,000 at December 31, 2021 and 2020, respectively.

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Interest cost

Actuarial loss

Actuarial loss (income)

Benefits paid

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based companies.

The long-term target allocation for equities, excluding Company stock, is approximately 45 percent.

The long-term target allocation for equities, excluding Company stock, is approximately 25 percent and the total equity target is 35 percent including Company stock.

Fixed Income (Debt):

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The fixed income portfolio has a duration similar to the plan’s liability stream and is designated to perform consistent with the movement of the plan’s liabilities.

Public real estate funds using office, apartment, industrial, retail and other property types.

In prior years Real Estate investments were reflected as a separate line item within the Mutual Funds category.

Effective 2017, the majority of Real Estate assets have been removed from this category and are currently being captured within the Equities assets category.

This change was consistent with the Global Industry Classification Standard (GICS) to better reflect the equity security features of Real Estate Investment Trusts (REITs).

Employer Securities:

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In 2020, the plans sold 31,706 shares to the Company’s ESOP trust on February 24, 2020.

In 2018, the plans sold 43,930 shares to the Company’s ESOP trust on February 21, 2018, 23,471 shares to the Company on March 9, 2018 and 16,833 shares to the Company on August 8, 2018.

The target allocation for employer securities is 15 percent of plan assets.

In 2019, the plans sold 32,299 shares to the Company’s ESOP trust on February 21, 2019.

In addition to these primary investment types, excess cash may be invested in futures in order to efficiently achieve more fully invested portfolio positions.

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Essentially, the plan is to hold equity instruments to back the benefits of participants yet to retire and bonds and cash to back current pensioners.

Although there are no formal target allocations for the plan assets, the trustee overall strategy is to achieve a mix of investments for long-term growth and near-term benefit payments with a wide diversification of asset types.

Although there are no formal target allocations for the plan assets, the overall strategy is to achieve a mix of investments for long-term growth and near-term benefit payments with a wide diversification of asset types.

Equity securities are selected from U.K., European, U.S.

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There are no specific prohibited investments, but the current managed fund will not allocate assets to derivatives or other financial hedging instruments.

Plan trustees meet regularly with the fund manager to assess

the fund’s performance and to reassess investment strategy.

Plan trustees meet regularly with the fund manager to assess the fund’s performance and to reassess investment strategy.

At December 31, 2021, the pension asset allocation was 13 percent equities, 74 percent fixed income, four percent insurance contracts, and nine percent cash.

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Both market pricing and future cash flow analysis may be used in the pricing process as follows:

Level 1 – Equities represent the largest asset category and are valued according to the exchange-quoted market prices of the underlying investments.

Level 1 – Equities are valued according to the exchange-quoted market prices of the underlying investments.

Level 1 fixed income securities are U.S.

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Level 2 – Fixed income investments without equivalent trading exchanges are valued primarily through a technique known as “future cash flow approach” which is based on what bondholders can reasonably expect to receive based upon an issuer’s current financial condition.

Pricing analysts prepare cash-flow forecasts and utilize one or two pricing models to arrive at an

evaluated price.

Pricing analysts prepare cash-flow forecasts and utilize one or two pricing models to arrive at an evaluated price.

Evaluated bid modeling includes factors such as the interest rate on the coupon, maturity, rating, cash flow projections and other factors.

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The redemption yield at the measurement date on U.K.

government fixed interest bonds and the yield on corporate bonds are used as proxies for the return on the debt portfolio.

government fixed interest bonds and

the yield on corporate bonds are used as proxies for the return on the debt portfolio.

The returns for equities and property are estimated as a premium of 3.7 percent added to the risk-free rate.

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In 2019, 2020 and 2021, profit sharing contributions for U.S.

employees, who received the majority of profit sharing contributions, were made partly in cash paid to the 401(k) plan and partly in Company common stock.

In 2019 and 2020, profit sharing contributions for U.S.

employees were made to the employee stock ownership plan.

Profit sharing contributions are allocated to participant accounts on the basis of participant base earnings

Effective January 1, 2018, the Company amended its U.S.

401(k) plan and its profit sharing formula, which resulted in a higher potential contribution percentage to the U.S.

401(k) plan and a lower potential profit sharing contribution percentage relative to prior years.

Defined contribution expenses for the Company’s qualified defined contribution plans and statutory profit sharing contributions were as follows:

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Therefore, the mutual funds are reported at fair value with any subsequent changes in fair value recorded in the income statement.

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

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

At December 31, 2021 and 2020, the trust asset balances were $ 2,146,000 and $ 1,778,000 , respectively, and the supplemental plan liability balances were $ 2,221,000 and $ 1,853,000 , respectively.

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Certain foreign locations are required by law to make profit sharing contributions to employees based on statutory formulas.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 1,679,000 , $ 935,000 and $ 374,000 , respectively, of statutory profit sharing expense and are included in the above table.

In all Company locations, approximately 79 percent of union and non-union employees are eligible for either Company’s sponsored or statutory profit sharing contributions and 100 percent of U.S.

For the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 219,000 , $ 1,679,000 and $ 935,000 , respectively, of statutory profit sharing expense that is included in the table above.

In all Company locations, approximately 77 percent of union and non-union employees are eligible for either the Company’s sponsored or statutory profit sharing contributions and 100 percent of U.S.

based union and non-union employees are eligible for the Company’s sponsored profit sharing contribution.

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Some of these proceedings may result in fines, penalties, judgments or costs being assessed against the Company at some future time.

The Company’s operations are subject to extensive local, state and federal regulations, including CERCLA and the Superfund amendments of 1986 (Superfund) as well as comparable regulations applicable to the Company’s foreign locations.

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

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

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

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

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

As of December 31, 2020, the Company estimated a range of possible environmental and legal losses of $ 22,884,000 to $ 41,104,000 .

Within the range of possible environmental and legal losses, management has currently concluded that no single amount is more likely to occur than any other amounts in the range and, thus, has accrued at the lower end of the range.

As of December 31, 2021, the Company estimated a range of possible environmental losses and legal losses of $ 23,127,000 to $ 41,659,000 .

Within the range of possible environmental losses and legal losses, management has currently concluded that no single amount is more likely to occur than any other amounts in the range and, thus, has accrued at the lower end of the range.

These accruals totaled $ 23,127,000 at December 31, 2021 and $ 22,884,000 at December 31, 2020.

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

Cash expenditures related to legal and environmental matters approximated $ 4,483,000 for the year ended December 31, 2020, compared to $ 3,791,000 in 2019.

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

Cash expenditures related to legal matters and environmental matters approximated $ 3,461,000 for the year ended December 31, 2021, compared to $ 4,483,000 in 2020, respectively.

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

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

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

on the Company’s financial position.

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

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The Company’s property in Maywood, New Jersey and property formerly owned by the Company adjacent to its current site and other nearby properties (collectively, the Maywood site) were listed on the National Priorities List in September 1993 pursuant to the provisions of CERCLA because of alleged chemical contamination.

Pursuant to (i) a September 21, 1987 Administrative Order on Consent entered into between the USEPA and the Company for property formerly owned by the Company at the Maywood site and (ii) the issuance of an order on November 12, 2004 by the USEPA to the Company for property currently owned by the Company at the Maywood site, the Company has completed various Remedial Investigation Feasibility Studies (RI/FS), and on September 24, 2014, USEPA issued its Record of Decision (ROD) for chemically-contaminated soil at the Maywood site, which requires the Company to perform remedial cleanup of the soil and buried waste.

Pursuant to (i) a September 21, 1987 Administrative Order on Consent entered into between the U.S.

Environmental Protection Agency (USEPA) and the Company for property formerly owned by the Company at the Maywood site and (ii) the issuance of an order on November 12, 2004 by the USEPA to the Company for property currently owned by the Company at the Maywood site, the Company has completed various Remedial Investigation Feasibility Studies (RI/FS), and on September 24, 2014, USEPA issued its Record of Decision (ROD) for chemically-contaminated soil at the Maywood site, which requires the Company to perform remedial cleanup of the soil and buried waste.

The USEPA has not yet issued a ROD for chemically-contaminated groundwater at the Maywood site.

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

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

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

Wilmington Site

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

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

The Company and other prior owners of the Wilmington site also entered into an agreement in April 2004 waiving certain statute of limitations defenses for claims which may be filed by the Town of Wilmington, Massachusetts, in connection with this site.

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

The Company and other prior owners of the Wilmington site also entered into an agreement in April 2004 waiving certain statute of limitations defenses for claims that may be filed by the Town of Wilmington, Massachusetts, in connection with this site.

While the Company has denied any liability for any such claims, the Company agreed to this waiver while the parties continue to discuss the resolution of any potential claim which may be filed.

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Based on current information, the Company believes that its recorded liability for the remediation of the affected areas is appropriate based on an estimate of expected costs.

However, actual costs could differ materially from current estimates.

However, actual costs could differ materially from current recorded liabilities.

Segment Reporting

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Operating income - segment totals

Business restructuring (1)

Business restructuring and asset disposition (1)

Unallocated corporate expenses (2)

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Consolidated depreciation and amortization

(1) See Note 22 regarding business restructuring costs.

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

See Note 22, Business Restructuring , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) regarding business restructuring costs.

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

Below is certain Company-wide geographic data for the years ended December 31, 2021, 2020 and 2019:

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All other countries

Net sales are attributed to countries based on the location of the Company facility making the sales.

Net sales are attributed to countries based on the location of the Company legal entity making the sale.

Includes net property, plant and equipment, goodwill and other intangible assets.

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Options/SARs to purchase 103,182 , 127,434 and 107,125 shares of common stock were excluded from the computations of diluted earnings per share for the years ended December 31, 2021, 2020 and 2019, respectively.

The options’/SARs’ exercise prices were greater than the average market price for the common stock and inclusion of the instruments would have had antidilutive effect on the computations of the earnings per share.

The options’/SARs’ exercise prices were greater than the average market price for the common stock and inclusion of the instruments would have had an antidilutive effect on the computations of the earnings per share.

Accumulated Other Comprehensive Income (Loss)

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Amounts reclassified from AOCI

Remeasurement adjustment related to the Tax Act (1)

Net current period other comprehensive income

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Amounts reclassified from AOCI

Remeasurement adjustment related to the Tax Act (1)

Net current period other comprehensive income

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Amounts in parentheses denote expense to statement of income.

This component of accumulated other comprehensive income is included in the computation of net periodic benefit cost (see Note 13 for details regarding net periodic benefit costs for the Company’s U.S.

This component of accumulated other comprehensive income is included in the computation of net periodic benefit cost (see Note 13, Postretirement Benefit Plans , of the notes to the Company’s consolidated financial statements for details regarding net periodic benefit costs for the Company’s U.S.

defined benefit plans).

2021 Acquisitions

INVISTA Acquisition

On January 29, 2021 , the Company and its wholly-owned subsidiaries Stepan Holdings Netherlands B.V.

and Stepan UK Limited (collectively, “Stepan”) entered into a Stock and Asset Purchase Agreement with Arteva Specialties B.V., INV Performance Surfaces, LLC, INVISTA Textiles (U.K.) Limited, INV Management Services, LLC, and INVISTA Equities, LLC (collectively, “INVISTA”) to acquire INVISTA's aromatic polyester polyol business and associated assets.

Included in the transaction were two manufacturing sites, one in Wilmington, North Carolina (U.S.) and the other in Vlissingen, Netherlands, along with intellectual property, customer relationships, inventory and working capital.

This acquisition expanded the Company’s manufacturing capabilities in both the United States and Europe and enhances its business continuity capabilities for the market.

The Company believes that INVISTA’s available spare capacity, combined with debottlenecking opportunities for both plants, will allow Stepan to support future market growth in a capital efficient way.

The purchase price was $ 165,000,000 , plus $ 21,560,000 of working capital and $ 3,000,000 of associated value-added taxes (VAT), and was paid in cash.

Immaterial working capital adjustments were finalized and paid during the second quarter of 2021.

The working capital acquired included $ 5,900,000 of cash.

The acquisition has been accounted for as a business combination, and the acquired operations are included in the Company’s Polymer segment in 2021.

The assets acquired and liabilities assumed as part of the acquisition were measured and recorded at estimated fair value.

The principle valuation techniques employed included cost and market approaches (PP&E), relief from royalty method under the income approach (trade name and technology/know-how) and multi-period excess earnings method under the income approach (customer relationships).

The Company finalized the purchase price allocation during the third quarter of 2021.

The following table summarizes the purchase price allocation for the major components of the acquisition:

(In thousands)

Property, plant and equipment

Identifiable intangibles assets

Total assets acquired

The acquired goodwill includes proprietary and intellectual property, brand recognition, business continuity benefits and marketing, manufacturing and supply chain synergies of the new business with the Company’s existing Polymer business.

acquired goodwill has been assigned to the Polymers segment and is deductible for tax purposes.

Identifiable intangible assets included technology and manufacturing know-how ($ 13,000,000 ), trademarks ($ 8,000,000 ) and customer relationships ($ 25,000,000 ).

The amortization periods for know-how and trademarks have been estimated to be in the range of 7 to 8 years .

The amortization period for customer relationships has been estimated to be in the range of 12 to 14 years .

As of December 31, 2021, in addition to the purchase price, the Company also paid $ 3,837,000 of acquisition-related expenses that primarily included legal, consulting, valuation and accounting services.

For the twelve months ended December 31, 2021, the Company incurred $ 1,890,000 of acquisition-related expenses.

These costs were included in the Administrative expenses line in the Company’s condensed consolidated statement of income.

The following table reflects pro forma financial information prepared under the assumption that the acquisition of the INVISTA aromatic polyester polyol business occurred on January 1, 2020.

Pro Forma Financial Information

Twelve Months Ended

(In thousands)

Net Income Attributable to Stepan Company

The supplemental pro forma information is presented for illustrative purposes only and may not be indicative of the consolidated results that would have been achieved by the Company had the acquisition occurred on January 1, 2020.

Furthermore, future results may vary materially from the results reflected in the pro forma information.

The pro forma results include adjustments primarily related to amortization of acquired intangible assets, depreciation of the fair value adjustment related to acquired plant assets, tax expense and management assumptions related to INVISTA’s legacy carved-out financial statements.

In addition, non-recurring adjustments to pro forma net income include $ 1,890,000 of acquisition-related expenses.

Such expenses were excluded from 2021 pro forma net income and included in 2020 pro forma net income.

Fermentation Plant Acquisition

On February 2, 2021, the Company acquired a fermentation plant, located in Lake Providence, Louisiana (U.S.).

The Company believes this plant complements the rhamnolipid-based bio-surfactant technology the Company acquired from Logos Technologies in March 2020.

Fermentation is a new platform technology for the Company and the Company is focusing efforts to further develop, integrate, produce and commercialize these unique surfactants moving forward.

Bio-surfactants, produced via fermentation, are attractive due to their biodegradability, low toxicity, and in some cases, unique antimicrobial properties.

These bio-surfactants offer synergies in several strategic end use markets including oilfield, agriculture, personal care and household, industrial and institutional.

The acquisition of this industrial scale fermentation plant represents the latest step in the Company’s bio-surfactant commercialization efforts.

The purchase price was $ 3,500,000 and was paid in cash.

This acquisition has been accounted for as an asset acquisition.

2020 Acquisitions

Clariant (Mexico) Acquisition

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

On September 17, 2020, the Company through its subsidiaries in Mexico, acquired Clariant (Mexico) S.A.

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

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

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

The purchase price of the acquisition was

$ 14,000,000 , plus associated value-added taxes (VAT).

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

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

As of December 31, 2021, $ 14,308,000 , inclusive of $ 308,000 net VAT, had been paid with cash on hand.

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Total assets acquired

Pro forma financial information has not been included because revenue and earnings of the Company’s consolidated entity would not have been materially different than reported had the acquisition date been January 1, 2019.

Other non-current liabilities

Total liabilities assumed

Net assets acquired

Logos Technologies Acquisition

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The acquired business did not impact the Company’s 2019 financial results.

2018 Acquisition

On March 26, 2018, the Company through a subsidiary in Mexico closed on a previously announced agreement with BASF Mexicana, S.A.DE C.V.

(BASF) to acquire BASF’s production facility in Ecatepec, Mexico and a portion of the associated surfactants business.

The facility is located close to Mexico City and has over 50,000 metric tons of capacity, 124,000 square feet of warehouse space, a large laboratory and office space.

The acquired assets and business are included in the Company’s Surfactants segment.

The purchase price of the acquisition was $ 22,852,000 and was paid with cash on hand.

The primary assets acquired were land, buildings, machinery and equipment and inventory.

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

No intangible assets were identified as part of the acquisition.

The following table summarizes the assets acquired as a result of the acquisition:

(In thousands)

Property, plant and equipment

Other Receivable

Total assets acquired

The acquired business had a minimal impact on the Company’s 2018 financial results.

Revenue from Contracts with Customers

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

As of December 31, 2020, the Company had $ 773,000 of contract liabilities and no contract assets associated with normal product supply arrangements.

As of December 31, 2021, the Company had $ 1,376,000 of contract liabilities and no contract assets.

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

In practice, this is rare as it would require a customer to make a payment prior to a performance obligation being satisfied.

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

In practice, this is

rare as it would require a customer to make a payment prior to a performance obligation being satisfied.

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

The Company recognized $ 773,000 of revenue in the current period from pre-existing contract liabilities at December 31, 20 2 0 .

During 2020 the Company also recognized $ 10,709,000 of long-term deferred revenue associated with a payment received to defray the cost of capital expenditures necessary to service a customer’s future product needs.

During 202 0 the Company recognized $ 10,709,000 of d eferred revenue associated with a payment received to defray the cost of capital expenditures necessary to service a customer’s future product needs.

This deferred revenue will be recognized over the period of the contract .

As of December 31 , 2021, no revenue has been recognized from this contract .

The tables below provide a geographic disaggregation of net sales for the years ended December 31, 2021, 2020 and 2019.

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Latin America

Business Restructuring

Business Restructuring and Asset Disposition

2019 Restructuring

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2016 Restructuring

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

This facility is a part of the Surfactant reportable segment.

This decision was made to improve future asset utilization and reduce the North American cost base going forward.

As a result, in 2017 the Company recorded $ 915,000 of restructuring expenses which reflected termination benefits for select plant employees and $ 1,290,000 of accelerated depreciation for the impacted manufacturing assets.

In the first quarter of 2019, the Company recognized a $ 251,000 favorable adjustment to the amount of termination benefits initially recorded.

2016 Restructuring

In May 2016, the Company announced plans to shut down its Long Mills, Ontario, Canada (Longford Mills) manufacturing facility, a part of the Surfactant reportable segment, by December 31, 2016.

The shutdown plan was implemented to improve the Company’s asset utilization in North America and to reduce the Company’s fixed cost base.

Manufacturing operations at the Longford Mills plant ceased by the end of 2016, and production of goods manufactured at the facility was transferred to other Company North American production sites.

Decommissioning of the assets is expected to continue throughout 2021.

Manufacturing operations at the Longford Mills plant ceased by the end of 2016, and production of goods manufactured at the facility was transferred to the Company’s other North American production sites.

As of December 31, 2021, $ 9,250,000 of aggregate restructuring expense had been recognized, reflecting $ 1,644,000 of termination benefits for approximately 30 employees and $ 7,606,000 for other expenses, principally site decommissioning costs.

The Company recognized $ 1,133,000 , $ 1,410,000 and $ 1,185,000 in 2020, 2019 and 2018, respectively.

The Company recognized restructuring expenses of $ 633,000 , $ 1,133,000 and $ 1,410,000 in 2021, 2020 and 2019, respectively.

Asset Disposition

In the fourth quarter 2021, the Company sold one of its corporate headquarter buildings and recognized a $ 2,720,000 loss on the sale of the building.

The loss is reflected in the Business restructuring and asset disposition line on the Company’s consolidated statements of income.

Insurance Recovery

Millsdale, IL site

Millsdale, Illinois site

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

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This insurance recovery was recognized as a reduction of expenses within cost of sales in the consolidated financial statement of income for the year ended December 31, 2020.

Surfactant and Polymer segment reported $ 5.2 million and $ 12.8 million, respectively in insurance recovery.

The Surfactant and Polymer segments recorded $ 5,200,000 and $ 12,800,000 , respectively, in insurance recovery.

Ecatepec, Mexico site

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Both claims related to the Company’s Surfactant segment.

In the fourth quarter of 2017, the Company paid $ 2,709,000 for one of the claims and reversed

the remainder of the reserve for the claim.

In the fourth quarter of 2017, the Company paid $ 2,709,000 for one of the claims and reversed the remainder of the reserve for the claim.

The claim reversal was recorded within net sales.

The second claim for $ 703,000 was paid in the second quarter of 2019 and was covered by insurance.

Statement of Cash Flows – Noncash Investing and Financing Activities

Noncash Investing and Financing Activities

Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $ 36,588,000 , $ 17,946,000 , and $ 16,890,000 that were unpaid at December 31, 2021, 2020 and 2019, respectively.

Noncash financing activities included 60,132 shares of Company common stock (valued at $ 7,286,000 ), 58,282 shares of Company common stock (valued at $ 5,485,000 ) and 96,095 shares of Company common stock (valued at $ 8,893,000 ) issued in connection with the Company’s stock award plan in 2021, 2020 and 2019, respectively.

Subsequent Events

On January 29, 2021 , the Company and its wholly-owned subsidiaries Stepan Holdings Netherlands B.V.

This acquisition expands the Company’s manufacturing capabilities in both the United States and Europe and enhances its business continuity capabilities for the market.

The purchase price was $ 165,000,000 , plus working capital, and was paid in cash.

The allocation of the purchase price to reflect the fair value of assets acquired and liabilities assumed has not been completed at the date of the filing of this report.

Such information will be included in a subsequent Quarterly Report on Form 10-Q.

The acquisition will be accounted for as a business combination, and the acquired operations will be included in the Company’s Polymer segment beginning in the first quarter of 2021.

On February 2, 2021, the Company acquired a fermentation plant, located in Lake Providence, Louisiana (U.S.).

The Company believes this plant complements the rhamnolipid-based bio-surfactant technology the Company acquired from Logos Technologies in March 2020.

Fermentation is a new platform technology for the Company and the Company is focusing efforts to further develop, integrate, produce and commercialize these unique surfactants moving forward.

Bio-surfactants, produced via fermentation, are attractive due to their biodegradability, low toxicity, and in some cases, unique antimicrobial properties.

These bio-surfactants offer synergies in several strategic end use markets including oilfield, agriculture, personal care and household, industrial and institutional.

The acquisition of this industrial scale fermentation plant represents the latest step in the Company’s bio-surfactant commercialization efforts.

The purchase price was $ 3,500,000 and was paid in cash.

This acquisition will be accounted for as an asset acquisition.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data