UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
FOR THE QUARTERLY PERIOD ENDED
FOR THE TRANSITION PERIOD FROM TO
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
(Address of principal executive offices)
Registrant’s telephone number (
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class |
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Trading symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☐ |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
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Outstanding at July 31, 2024 |
Common Stock, $1 par value |
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Part I FINANCIAL INFORMATION
Item 1 - Financial Statements
STEPAN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share amounts) |
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Net Sales |
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$ |
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$ |
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$ |
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$ |
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Cost of Sales |
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Gross Profit |
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Operating Expenses: |
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Selling |
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Administrative |
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Research, development and technical services |
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Deferred compensation expense |
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Business restructuring expense |
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— |
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— |
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Operating Income |
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Other Income (Expense): |
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Interest, net |
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Other, net (Note 15) |
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Income Before Provision for Income Taxes |
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Provision for Income Taxes |
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Net Income |
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Net Income Per Common Share (Note 10): |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Shares Used to Compute Net Income Per Common Share (Note 10): |
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Basic |
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Diluted |
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The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
2
STEPAN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(In thousands) |
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Net Income |
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$ |
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$ |
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$ |
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$ |
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Other Comprehensive Income: |
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Foreign currency translation adjustments (Note 11) |
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Defined benefit pension adjustments, net of tax (Note 11) |
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Derivative instrument activity, net of tax (Note 11) |
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Total Other Comprehensive Income |
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Comprehensive Income |
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$ |
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$ |
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$ |
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$ |
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The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
3
STEPAN COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in thousands) |
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June 30, 2024 |
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December 31, 2023 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Inventories (Note 6) |
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Other current assets |
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Total current assets |
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Property, Plant and Equipment: |
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Cost |
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Less: Accumulated depreciation |
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Property, plant and equipment, net |
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Goodwill, net |
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Other intangible assets, net |
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Long-term investments (Note 3) |
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Operating lease assets (Note 7) |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Equity |
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Current Liabilities: |
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Current maturities of debt (Note 14) |
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$ |
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$ |
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Accounts payable |
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Accrued liabilities |
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Total current liabilities |
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Deferred income taxes |
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Long-term debt, less current maturities (Note 14) |
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Non-current operating lease liabilities (Note 7) |
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Other non-current liabilities |
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Equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss (Note 11) |
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Retained earnings |
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Less: Common treasury stock, at cost, |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
4
STEPAN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands) |
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Six Months Ended June 30, |
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2024 |
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2023 |
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Cash Flows From Operating Activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash |
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Depreciation and amortization |
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Deferred compensation |
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Realized and unrealized gains on long-term investments |
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Stock-based compensation |
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Deferred income taxes |
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( |
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Other non-cash items |
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Changes in assets and liabilities: |
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Receivables, net |
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( |
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Inventories |
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( |
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Other current assets |
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( |
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( |
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Accounts payable and accrued liabilities |
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( |
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Pension liabilities |
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( |
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( |
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Environmental and legal liabilities |
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( |
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Deferred revenues |
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( |
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( |
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Net Cash Provided By Operating Activities |
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Cash Flows From Investing Activities |
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Expenditures for property, plant and equipment |
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( |
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Other, net |
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Net Cash Used In Investing Activities |
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( |
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Cash Flows From Financing Activities |
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Revolving debt and bank overdrafts, net (Note 14) |
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Other debt repayments (Note 6) |
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( |
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( |
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Dividends paid |
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( |
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( |
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Stock option exercises |
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Other, net |
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( |
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( |
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Net Cash Provided By (Used In) Financing Activities |
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( |
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Effect of Exchange Rate Changes on Cash |
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( |
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Net Decrease in Cash and Cash Equivalents |
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( |
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( |
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Cash and Cash Equivalents at Beginning of Period |
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Cash and Cash Equivalents at End of Period |
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$ |
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$ |
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Supplemental Cash Flow Information |
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Cash payments of income taxes, net of refunds |
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$ |
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$ |
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Cash payments of interest |
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$ |
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$ |
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The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
5
STEPAN COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
Unaudited
The condensed consolidated financial statements included herein have been prepared by Stepan Company (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). 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 June 30, 2024, its results of operations for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023, 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, 2023 (2023 Annual Report on Form 10-K).
Below are reconciliations of total equity for the three and six months ended June 30, 2024 and 2023:
(In thousands, except share and per share amounts) |
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Total |
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Common |
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Additional |
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Common |
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Accumulated |
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Retained |
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Balance, March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of |
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— |
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— |
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— |
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Stock-based and deferred compensation |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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( |
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— |
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— |
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— |
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( |
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— |
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Cash dividends paid: |
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Common stock ($ |
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— |
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— |
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— |
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— |
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( |
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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(In thousands, except share and per share amounts) |
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Total |
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Common |
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Additional |
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Common |
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Accumulated |
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Retained |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of |
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— |
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— |
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— |
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Stock-based and deferred compensation |
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( |
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( |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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( |
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— |
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— |
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— |
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( |
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— |
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Cash dividends paid: |
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Common stock ($ |
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( |
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— |
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— |
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— |
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— |
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( |
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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6
(In thousands, except share and per share amounts) |
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Total |
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Common |
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Additional |
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Common |
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Accumulated |
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Retained |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of |
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— |
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— |
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— |
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Stock-based and deferred compensation |
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( |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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|
||||||
Other comprehensive income |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
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||||||
Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common stock ($ |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Balance, June 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
(In thousands, except share and per share amounts) |
|
Total |
|
|
Common |
|
|
Additional |
|
|
Common |
|
|
Accumulated |
|
|
Retained |
|
||||||
Balance, December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
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|
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|
|
|
|
|
|
|
|
|
||||||
Issuance of |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock-based and deferred compensation |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common stock ($ |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Balance, June 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Derivative assets and liabilities include the foreign currency exchange and interest rate swap contracts discussed in Note 4, Derivative Instruments, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q). Fair value and carrying value were the same because the contracts were recorded at fair value. The fair values of the foreign currency contracts were calculated as the difference between the applicable forward foreign exchange rates at the reporting date and the contracted foreign exchange rates multiplied by the contracted notional amounts. The fair value of the interest rate swap 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 June 30, 2024, and December 31, 2023, 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 $
(In thousands) |
|
June 30, |
|
|
December 31, |
|
||
Fair value |
|
$ |
|
|
$ |
|
||
Carrying value |
|
|
|
|
|
|
||
7
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, 2024, and December 31, 2023, and the level within the fair value hierarchy in which the fair value measurements fall:
(In thousands) |
|
June 30, |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Mutual fund assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Foreign currency contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total assets at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
(In thousands) |
|
December 31, |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Mutual fund assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Derivative assets: |
|
|
|
|
|
|
|
|
|
|||||||