What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 152 added, 74 removed, 455 unchanged (33% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Cost of Sales

3 unchanged sentences

Deferred compensation (income) expense

Goodwill impairment (Note 18)

Business restructuring expenses (Note 16)

5 unchanged sentences

Provision for Income Taxes

Net Income Attributable to Noncontrolling Interest

Net Income Attributable to Stepan Company

6 unchanged sentences

Three Months Ended

Six Months Ended

Other Comprehensive Income:

12 unchanged sentences

(Dollars in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

38 unchanged sentences

(In thousands)

Three Months Ended March 31

Six Months Ended June 30

Cash Flows From Operating Activities

Adjustments to reconcile net income to net cash

provided by (used in) operating activities:

provided by operating activities:

Depreciation and amortization

3 unchanged sentences

Deferred income taxes

Goodwill impairment (Note 18)

Other non-cash items

6 unchanged sentences

Deferred revenues

Net Cash Used In Operating Activities

Net Cash Provided By Operating Activities

Cash Flows From Investing Activities

6 unchanged sentences

Other debt borrowings (Note 14)

Other debt repayments

Dividends paid

12 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

June 30, 2022

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

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

In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of March 31, 2022, and its results of operations and cash flows for the three months ended March 31, 2022 and 2021, have been included.

In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of June 30, 2022, and its results of operations and cash flows for the three and six months ended June 30, 2022 and 2021, have been included.

These financial statements and related footnotes should be read in conjunction with the financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Annual Report on Form 10-K).

RECONCILIATIONS OF EQUITY

Below are reconciliations of total equity for the three months ended March 31, 2022 and 2021:

Below are reconciliations of total equity for the three and six months ended June 30, 2022 and 2021:

(In thousands, except share and per share amounts)

1 unchanged sentence

Income (Loss)

Balance, March 31, 2022

Issuance of 1,133 shares of common stock under stock option plan

Purchase of 69,734 shares of common stock

Stock-based and deferred compensation

Other comprehensive income

Cash dividends paid:

Common stock ($ 0.335 per share)

Balance, June 30, 2022

(In thousands, except share and per share amounts)

Comprehensive

Income (Loss)

Balance, December 31, 2021

5 unchanged sentences

Common stock ($ 0.670 per share)

Balance, March 31, 2022

Balance, June 30, 2022

(In thousands, except share and per share amounts)

2 unchanged sentences

Noncontrolling

Balance, December 31, 2020

Balance, March 31, 2021

Issuance of 10,779 shares of common stock under stock option plan

4 unchanged sentences

Common stock ($ 0.305 per share)

Balance, March 31, 2021

Balance, June 30, 2021

(In thousands, except share and per share amounts)

Comprehensive

Income (Loss)

Noncontrolling

Balance at December 31, 2020

Issuance of 16,565 shares of common stock under stock option plan

Purchase of 82,045 shares of common stock

Stock-based and deferred compensation

Other comprehensive income

Cash dividends paid:

Common stock ($ 0.610 per share)

Balance at June 30, 2021

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

4 unchanged sentences

The fair value of the interest rate swaps was calculated as the difference between the contracted swap rate and the floating interest rate multiplied by the present value of the notional amount of the contract.

At March 31, 2022, and December 31, 2021, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $ 812,000 and $ 710,000 as of March 31, 2022 and December 31, 2021, respectively):

At June 30, 2022, and December 31, 2021, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $ 783,000 and $ 710,000 as of June 30, 2022 and December 31, 2021, respectively):

(In thousands)

Carrying value

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of March 31, 2022, and December 31, 2021, and the level within the fair value hierarchy in which the fair value measurements fall:

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of June 30, 2022, and December 31, 2021, and the level within the fair value hierarchy in which the fair value measurements fall:

(In thousands)

16 unchanged sentences

DERIVATIVE INSTRUMENTS

At March 31, 2022, and December 31, 2021, the Company had open forward foreign currency exchange contracts, all with durations of one to three months , to buy or sell foreign currencies with U.S.

At June 30, 2022, and December 31, 2021, the Company had open forward foreign currency exchange contracts, all with durations of one to three months , to buy or sell foreign currencies with U.S.

dollar equivalent amounts of $ 46,023,000 and $ 51,542,000 , respectively.

1 unchanged sentence

The interest rate swap is recognized on the balance sheet as either an asset or a liability measured at fair value.

At March 31, 2022, the Company held an interest rate swap contract with a notional value of $ 100,000,000 that was designated as a cash flow hedge.

At June 30, 2022, the Company held an interest rate swap contract with a notional value of $ 100,000,000 that was designated as a cash flow hedge.

Period-to-period changes in the fair value of the interest rate swap are initially recognized as gains or losses in other comprehensive income.

1 unchanged sentence

The maturity date of the current interest swap contract is March 10, 2027 .

The fair values of the derivative instruments held by the Company on March 31, 2022, and December 31, 2021, are disclosed in Note 3, Fair Value Measurements , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

Derivative instrument gains and losses for the three-month periods ended March 31, 2022 and 2021, were immaterial.

For amounts reclassified out of AOCI into earnings for the three-month periods ended March 31, 2022 and 2021, see Note 11, Accumulated Other Comprehensive Income (Loss) , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

The fair values of the derivative instruments held by the Company on June 30, 2022, and December 31, 2021, are disclosed in Note 3, Fair Value Measurements , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

Derivative instrument gains and losses for the three and six months ended June 30, 2022 and 2021, were immaterial.

For amounts reclassified out of AOCI into earnings for the three and six months ended June 30, 2022 and 2021, see Note 11, Accumulated Other Comprehensive Income (Loss) , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

STOCK-BASED COMPENSATION

2 unchanged sentences

Three Months Ended

The increase in stock-based compensation expense for the first quarter of 2022 compared to the first quarter of 2021 was primarily attributable to the previously-disclosed accelerated vesting of certain equity grants for the Company’s Chief Executive Officer, who retired effective on April 25, 2022, that were partially offset by lower cash-settled SARs-related compensation expense.

The lower cash-settled SARs compensation expense reflects a $ 25.48 per share decrease in the market price of Company common stock in the first quarter of 2022 compared to a $ 7.79 per share increase in the first quarter of 2021.

Six Months Ended

The increase in stock-based compensation expense for the second quarter of 2022 compared to the second quarter of 2021 was primarily attributable to the accelerated vesting of certain equity grants for the Company’s former Chief Executive Officer, who retired on April 25, 2022.

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

(In thousands)

March 31, 2022

June 30, 2022

December 31, 2021

Stock options

The increases in unrecognized compensation costs for stock options, stock awards and SARs reflected the 2022 grants of:

The change in unrecognized compensation costs for stock options, stock awards and SARs primarily reflects the 2022 grants of:

Stock options

Stock awards (at target)

The unrecognized compensation costs at March 31, 2022, are expected to be recognized over weighted-average periods of 1.3 years for stock options, 2.0 years for stock awards and 2.0 years for SARs.

The composition of inventories at March 31, 2022, and December 31, 2021, was as follows:

The unrecognized compensation costs at June 30, 2022, are expected to be recognized over weighted-average periods of 1.4 years for stock options, 2.0 years for stock awards and 2.0 years for SARs.

The composition of inventories at June 30, 2022, and December 31, 2021, was as follows:

(In thousands)

March 31, 2022

June 30, 2022

December 31, 2021

2 unchanged sentences

Total inventories

As of March 31, 2022, the Company had railcar leases, valued at approximately $ 79,000 , that had not commenced.

These leases will commence in the second quarter of 2022 with lease terms of three years .

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

(In thousands)

March 31, 2022

Three months ended

June 30, 2022

Six months ended

June 30, 2022

Operating lease cost

6 unchanged sentences

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

The following table outlines the maturities of lease liabilities as of March 31, 2022.

The following table outlines the maturities of lease liabilities as of June 30, 2022.

(In thousands)

Undiscounted Cash Flows:

2022 (excluding the three months ended March 31, 2022)

2022 (excluding the six months ended June 30, 2022)

Subsequent to 2026

8 unchanged sentences

Weighted-average discount rate-operating leases

As of June 30, 2022, the Company had no leases that have not commenced.

CONTINGENCIES

13 unchanged sentences

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

As of March 31, 2022, the Company estimated a range of possible environmental losses and legal losses of $ 23,139,000 to $ 41,695,000 .

As of June 30, 2022, the Company estimated a range of possible environmental losses and legal losses of $ 22,953,000 to $ 42,647,000 .

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 $ 23,139,000 at March 31, 2022 and $ 23,127,000 at December 31, 2021.

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 $ 428,000 and $ 280,000 for the three-month periods ended March 31, 2022 and 2021, respectively.

These accruals totaled $ 22,953,000 at June 30, 2022 and $ 23,127,000 at December 31, 2021.

Although the Company believes that its estimated range of possible environmental losses and legal losses and 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 $ 1,080,000 and $ 1,267,000 for the six months ended June 30, 2022 and 2021, 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.

1 unchanged sentence

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.

aggregate, will not have a material effect 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.

Following are summaries of the Company’s major contingencies at March 31, 2022:

Following are summaries of the Company’s major contingencies at June 30, 2022:

Maywood, New Jersey Site

24 unchanged sentences

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

The Company has paid the current owner $ 3,364,000 for the Company’s portion of environmental response costs at the Wilmington site through March 31, 2022.

The Company has paid the current owner $ 3,364,000 for the Company’s portion of environmental response costs at the Wilmington site through June 30, 2022.

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

2 unchanged sentences

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.

Through the regular environmental monitoring of its plant production sites, the Company discovered levels of chemical contamination that were above thresholds allowed by law at its Millsdale, Illinois and Fieldsboro, New Jersey plants.

Through the regular environmental monitoring of its plant production sites, the Company discovered levels of chemical contamination that were above thresholds allowed by law at its Elwood, Illinois (Millsdale) and Fieldsboro, New Jersey plants.

The Company voluntarily reported its results to the applicable state environmental agencies.

8 unchanged sentences

UNITED STATES

UNITED KINGDOM

(In thousands)

Three Months Ended

Six Months Ended

Interest cost

Expected return on plan assets

Amortization of net actuarial loss

Net periodic benefit cost (income)

UNITED KINGDOM

(In thousands)

Three Months Ended

Six Months Ended

Interest cost

1 unchanged sentence

Amortization of net actuarial loss

Net periodic benefit cost

Net periodic benefit cost (income)

Employer Contributions

2 unchanged sentences

Approximately $ 276,000 is expected to be paid related to the unfunded non-qualified plans in 2022.

Of such amount, $ 119,000 had been paid related to the non-qualified plans as of March 31, 2022.

Of such amount, $ 171,000 had been paid related to the non-qualified plans as of June 30, 2022.

The Company’s U.K.

subsidiary expects to contribute approximately $ 505,000 to its defined benefit pension plan in 2022.

Of such amount, $ 136,000 had been contributed to the plan as of March 31, 2022.

Of such amount, $ 253,000 had been contributed to the plan as of June 30, 2022.

Defined Contribution Plans

1 unchanged sentence

The Company’s U.S.

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

In the three months ended March 31, 2022 and 2021, the Company made contributions into the qualified retirement plans for U.S.

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

In the six months ended June 30, 2022 and 2021, the Company made contributions into the qualified retirement plans for U.S.

employees and for certain non-U.S.

6 unchanged sentences

Three Months Ended

Six Months Ended

Retirement savings contributions

2 unchanged sentences

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

The trust comprises various mutual fund investments selected by the participants of the supplemental plans.

The trust is comprised of various mutual fund investments selected by the participants of the supplemental plans.

In accordance with the accounting guidance for rabbi trust arrangements, the assets of the trust and the obligations of the supplemental plans are reported on the Company’s condensed consolidated balance sheets.

2 unchanged sentences

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

At March 31, 2022, the balance of the trust assets was $ 2,281,000 , which equaled the balance of the supplemental plan liabilities.

At June 30, 2022, the balance of the trust assets was $ 2,114,000 , which equaled the balance of the supplemental plan liabilities.

See the long-term investments section in Note 3, Fair Value Measurements , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for further information regarding the Company’s mutual fund assets.

EARNINGS PER SHARE

Below are the computations of basic and diluted earnings per share for the three months ended March 31, 2022 and 2021:

Below are the computations of basic and diluted earnings per share for the three and six months ended June 30, 2022 and 2021:

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

Computation of Basic Earnings per Share

15 unchanged sentences

Diluted earnings per share

364,350 options/SARs to acquire shares of Company common stock were excluded from the computation of dilutive earnings per share for the three months ended March 31, 2022.

337,056 and 350,703 options/SARs to acquire shares of Company common stock were excluded from the computation of dilutive earnings per share for the three and six months ended June 30, 2022, respectively.

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

No options/SARs to acquire shares of Company common stock were excluded from the computations of diluted earnings per share for the three months ended March 31, 2021.

No options/SARs to acquire shares of Company common stock were excluded from the computations of diluted earnings per share for the three and six months ended June 30, 2021.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Below is the change in the Company’s AOCI balance by component (net of income taxes) for the three months ended March 31, 2022 and 2021:

Below is the change in the Company’s accumulated other comprehensive income (AOCI) balance by component (net of income taxes) for the three and six months ended June 30, 2022 and 2021:

(In thousands)

Balance at December 31, 2020

Balance at March 31, 2021

Other comprehensive income before

2 unchanged sentences

Net current-period other comprehensive income

Balance at June 30, 2021

Balance at March 31, 2022

Balance at December 31, 2021

Other comprehensive income before

2 unchanged sentences

Net current-period other comprehensive income

Balance at March 31, 2022

Information regarding the reclassifications out of AOCI for the three-month periods ended March 31, 2022 and 2021, is displayed below:

Balance at June 30, 2022

Balance at December 31, 2020

Other comprehensive income before reclassifications

Amounts reclassified from AOCI

Net current-period other comprehensive income

Balance at June 30, 2021

Balance at December 31, 2021

Other comprehensive income before reclassifications

Amounts reclassified from AOCI

Net current-period other comprehensive income

Balance at June 30, 2022

Information regarding the reclassifications out of AOCI for the three and six months ended June 30, 2022 and 2021, is displayed below:

(In thousands)

2 unchanged sentences

Three Months Ended

Six Months Ended

Affected Line Item in

12 unchanged sentences

Surfactants, Polymers and Specialty Products.

Net sales by segment for the three months ended March 31, 2022 and 2021, were as follows:

Net sales by segment for the three and six months ended June 30, 2022 and 2021, were as follows:

(In thousands)

Three Months Ended

Six Months Ended

Segment Net Sales

Specialty Products

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three months ended March 31, 2022 and 2021, are summarized below:

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three and six months ended June 30, 2022 and 2021, are summarized below:

(In thousands)

Three Months Ended

Six Months Ended

Segment Operating Income

7 unchanged sentences

Income before provision for income taxes

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

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 are not used to evaluate segment performance.

REVENUE FROM CONTRACTS WITH CUSTOMERS

As of March 31, 2022, the Company had $ 1,878,000 of contract liabilities and no contract assets.

As of June 30, 2022, the Company had $ 1,606,000 of contract liabilities and no contract assets.

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

1 unchanged sentence

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

The Company recognized $ 1,376,000 of revenue in the current period from pre-existing contract liabilities at December 31, 2021.

The Company recognized $ 1,376,000 of revenue in the first six months of 2022 from pre-existing contract liabilities at December 31, 2021.

During 2020 the Company recorded $ 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.

On March 31, 2022, $ 9,248,000 continued to be classified as long-term and $ 1,461,000 was classified as short-term.

This deferred revenue will be recognized over the period of the contract and no revenue has been recognized from this contract as of March 31, 2022.

The tables below provide a geographic disaggregation of net sales for the three months ended March 31, 2022 and 2021.

On June 30, 2022, $ 8,762,000 continued to be classified as long-term and $ 1,947,000 was classified as short-term.

This deferred revenue will be recognized over the period of the contract and no revenue has been recognized from this contract as of June 30, 2022.

The tables below provide a geographic disaggregation of net sales for the three and six months ended June 30, 2022 and 2021.

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

For the Three Months Ended March 31, 2022

(In thousands)

For the Three Months Ended June 30, 2022

Geographic Market

1 unchanged sentence

Latin America

For the Three Months Ended March 31, 2021

(In thousands)

For the Three Months Ended June 30, 2021

Geographic Market

1 unchanged sentence

Latin America

At March 31, 2022 and December 31, 2021, debt was comprised of the following:

(In thousands)

For the Six Months Ended June 30, 2022

Geographic Market

North America

Latin America

(In thousands)

For the Six Months Ended June 30, 2021

Geographic Market

North America

Latin America

At June 30, 2022 and December 31, 2021, debt was comprised of the following:

(In thousands)

Unsecured private placement notes

16 unchanged sentences

The NYL note purchase agreement and the Prudential note purchase agreement require the maintenance of certain financial ratios and 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 .

On June 24, 2022, the Company entered into a credit agreement with a syndicate of banks.

The credit agreement provides for credit facilities in an initial aggregate principal amount of $ 450,000,000 , consisting of (a) a $ 350,000,000 multi-currency revolving credit facility and (b) a $ 100,000,000 delayed draw term loan credit facility, each of which matures on June 24, 2027 .

This credit agreement replaced the Company’s prior $ 350,000,000 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 March 31, 2022, the Company had outstanding letters of credit totaling $ 6,993,000 and $ 100,000,000 outstanding borrowings under the revolving credit agreement.

There was $ 243,007,000 available under the revolving credit agreement as of March 31, 2022.

As of June 30, 202 2 , the Company had outstanding letters of credit totaling $ 7,029,000 and $ 100,000,000 outstanding b orrowing s under the c redit agreement .

There was $ 342,971,000 available under the credit agreement as of June 30 , 202 2 .

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

Based on the loan agreement provisions that

place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $ 495,572,000 and $ 468,095,000 at March 31, 202 2 and December 31, 20 2 1 , respectively .

Based on the loan agreement provisions that place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $ 196,935,000 and $ 468,095,000 at June 30, 2022 and December 31, 2021, respectively.

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

1 unchanged sentence

Three Months Ended

Six Months Ended

Foreign exchange gains (losses)

8 unchanged sentences

Decommissioning of the assets is expected to continue throughout 2022.

As of March 31, 2022, $ 9,302,000 of aggregate restructuring expense has been recognized, reflecting $ 1,644,000 of termination benefits for approximately 30 employees and $ 7,658,000 for other expenses, principally site decommissioning costs.

The Company recognized $ 52,000 and $ 81,000 of decommissioning expenses in the first quarter of 2022 and 2021, respectively.

As of June 30, 2022, $ 9,383,000 of aggregate restructuring expense has been recognized, reflecting $ 1,644,000 of termination benefits for approximately 30 employees and $ 7,739,000 for other expenses, principally site decommissioning costs.

The Company recognized $ 81,000 and $ 114,000 of decommissioning expenses in the second quarter of 2022 and 2021, respectively.

The Company recognized $ 133,000 and $ 195,000 of decommissioning expenses in the first six months of 2022 and 2021, respectively.

2021 Acquisitions

17 unchanged sentences

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

The acquisition of this industrial scale fermentation plant represents the latest

step in the Company’s bio-surfactant commercialization efforts.

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.

GOODWILL IMPAIRMENT

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

Testing is completed more frequently when triggering events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit to which goodwill relates has declined below its carrying value.

During the second quarter of 2022 the Company completed its annual goodwill impairment testing and concluded that the goodwill related to its Philippines reporting unit was impaired.

The Philippines reporting unit is part of the Company’s Surfactant segment.

Goodwill impairment was recognized as a result of the reporting unit’s fair value declining below its carrying value.

The Company estimates the fair value of each of its reporting units based on the average of market and income-based computations.

See the Critical Accounting Policies, Goodwill and Intangible Assets , disclosed in the Company’s 2021 Annual Report on Form 10-K for further details on how the Company computes market and income-based fair values.

The Philippines impairment primarily resulted from lost market share at one major customer combined with higher unit overhead costs.

The Company recorded a non-cash charge of $ 978,000 in the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2022.

The impairment charge equaled the entire balance of the Philippines’ goodwill.

The Company concluded that there was no goodwill impairment at any of its other reporting units based on its testing completed during the second quarter of 2022.

NONCASH INVESTING ACTIVITIES

Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $ 37,154,000 and $ 13,822,000 that were unpaid at March 31, 2022 and 2021, respectively.

Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $ 29,032,000 and $ 12,271,000 that were unpaid at June 30, 2022 and 2021, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

17 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements