STEPAN CO
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
SCL$66.94-1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0000950170-24-055552
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000950170-24-093579
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 115 previous paragraphs and 158 current paragraphs.
60 unchanged; 48 reworded; 44 added; 7 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 17 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
Operating income in the second quarter of 2024 increased $0.9 million, or five percent, versus operating income in the second quarter of 2023. Surfactant and Specialty Products operating income increased $1.9 million and $3.6 million, respectively, versus the second quarter of 2023. Polymer operating income decreased $2.7 million versus the second quarter of 2023. Corporate expenses, including business restructuring, environmental remediation, deferred compensation and a $3.5 million expense recognized as a result of a criminal social engineering scheme impacting one the Company's subsidiaries in Asia, increased $1.9 million, or 11 percent, year-over-year. See Note 17, Other Matter, of the notes to the Company's consolidated financial statements (included in Item 1 of the Form 10-Q) for additional details regarding the criminal social engineering scheme.
Current report
Selling expenses increased $0.7 million, or six percent, year-over-year.
Current report
Administrative expenses increased $2.0 million, or nine percent year-over-year, primarily due to a $3.5 million expense recognized as a result of the criminal social engineering scheme impacting one of the Company's subsidiaries in Asia that was partially offset by lower salaries.
Current report
Net interest expense for the second quarter of 2024 decreased $1.2 million, or 31 percent, versus the second quarter of 2023. This decrease was primarily attributable to higher non-US interest income recognition.
Current report
Net sales for European operations decreased $5.3 million, or eight percent, primarily due to lower average selling prices that negatively impacted the change in net sales by $14.9 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity within certain end-use markets. Foreign currency translation negatively impacted the change in net sales by $0.3 million. Sales volume was up 14 percent year-over-year and positively impacted the change in net sales by $9.9 million. The sales volume improvement was primarily due to higher demand for products sold into the consumer products end markets and to our distribution partners, partially offset by lower demand for products sold into the agricultural end markets.
Current report
Net sales for Latin American operations increased $5.4 million, or seven percent, largely due to a 15 percent increase in sales volume that positively impacted the change in net sales by $11.7 million. The sales volume improvement was primarily due to higher demand for products sold into the consumer products and agricultural end markets and to our distribution partners. Lower average selling prices negatively impacted the change in net sales by $6.3 million. The lower average selling prices primarily reflect the pass-through of lower raw material costs and increased competitive pressures from imports.
Current report
Net sales for Asian operations decreased $1.0 million, or eight percent, versus the prior year quarter. Lower average selling prices and the unfavorable impact of foreign currency translation negatively impacted the change in net sales by $1.6 million and $0.5 million, respectively. An eight percent increase in sales volume positively impacted the change in net sales by $1.1 million. The sales volume improvement was mainly due to higher demand for products sold to our distribution partners and into the agricultural end markets.
Current report
Gross profit for European operations increased $1.4 million, or 28 percent, due to higher average unit margins and a 14 percent increase in sales volume. These factors positively affected the change in net sales by $0.7 million each.
Current report
Gross profit for Latin American operations increased $3.9 million, or 54 percent, primarily due to improved average margins and a 15 percent increase in sales volume. These items positively impacted the year-over-year change in gross profit by $3.0 million and $1.1 million, respectively. The higher average unit margins were primarily due to a more favorable product mix. Foreign currency translation negatively impacted the change in gross profit by $0.2 million.
Current report
Net sales for North American operations decreased $8.3 million, or nine percent, due to lower average selling prices and a four percent decrease in sales volume. These items negatively impacted the year-over-year change in net sales by $4.9 million and $3.4 million, respectively. The lower average selling prices primarily reflect the pass-through of lower raw material costs. The decline in sales volume is mostly attributable to a 50 percent decrease within the commodity phthalic anhydride business due to operational issues at the Millsdale, Illinois plant site during the second quarter of 2024. Sales volume of specialty polyols increased 25 percent year-over year while sales volume of polyols used in rigid foam applications declined one percent.
Current report
Net sales for European operations increased $1.5 million, or two percent, versus the second quarter of 2023. This increase was primarily due to the favorable impact of foreign currency translation and a three percent increase in sales volume. These items positively impacted the year-over-year change in net sales by $2.1 million and $2.0 million, respectively. A weaker U.S. dollar relative to the Polish zloty and British pound sterling led to the favorable foreign currency translation effect. Lower average selling prices negatively impacted the year-over-year change in net sales by $2.6 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs and increased competitive activity.
Current report
Gross profit for North American operations decreased $1.1 million, or nine percent, due to lower average unit margins and a four percent decline in sales volume. These items negatively impacted the change in gross profit by $0.6 million and $0.5 million, respectively. The lower average unit margins were primarily due to a non-cash phthalic anhydride related catalyst write-off ($2.1 million) and higher expenses incurred at the Company's Millsdale, Illinois plant site due to operational issues in the second quarter of 2024.
Current report
Gross profit for European operations decreased $2.3 million, or 24 percent, versus the second quarter of 2023. This decrease was primarily due to lower average unit margins that negatively impacted the change in gross profit by $2.7 million. A three percent increase in sales volume and the favorable effect of foreign currency translation positively impacted the year-over-year change in gross profit by $0.3 million and $0.1 million, respectively.
Current report
Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, increased $1.9 million, or 11 percent, year-over-year. Corporate expenses were $19.3 million in the second quarter of 2024 versus $17.4 million in the second quarter of 2023. This increase was primarily due to a $3.5 million expense related to a criminal social engineering scheme that impacted the Company's subsidiary in Asia, that was partially offset by lower deferred compensation expense and productivity measures implemented in late 2023. See Note 17, Other Matter, of the notes to the Company's consolidated financial statements for additional details regarding the criminal social engineering scheme.
Current report
Six Months Ended June 30, 2024 and 2023
Current report
Summary
Current report
Consolidated net sales decreased $123.6 million, or 10 percent, year-over-year. Lower average selling prices negatively impacted the year-over-year change in net sales by $166.1 million. The decrease in average selling prices was mainly due to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity primarily within the European and Latin American end markets. Consolidated sales volume increased two percent and favorably impacted the year-over-year change in net sales by $29.9 million. Sales volume in the Surfactant, Polymer and Specialty Products segments increased three percent, two percent and four percent, respectively. Foreign currency translation favorably impacted the year-over-year change in net sales by $12.6 million mainly due to a weaker U.S. dollar against the British pound, Mexican peso, Colombian peso and Polish zloty.
Current report
Operating income for the first half of 2024 was flat versus operating income for the first half of 2023. Surfactant and Specialty Products operating income increased $0.9 million and $5.3 million, respectively, versus the first half of 2023. Polymer operating income decreased $4.3 million year-over-year. Corporate expenses, including business restructuring, environmental remediation, deferred compensation and a $3.5 million expense recognized for a criminal social engineering scheme at one of the Company's subsidiaries in
Current report
Asia, increased $1.9 million, or five percent, year-over-year. See Note 17, Other Matter, of the notes to the Company's consolidated financial statements (included in Item 1 of the Form 10-Q) for additional details regarding the criminal social engineering scheme. Foreign currency translation had a $0.6 million favorable impact on operating income in the first half of 2024 versus the first half of 2023.
Current report
Selling expenses decreased $1.0 million, or four percent, year-over-year primarily due to lower salaries.
Current report
Deferred compensation expenses were flat year-over-year. See the Overviewand Segment Results-Corporate Expenses section of this MD&A for further details.
Current report
Other, net was $3.6 million of income for the first half of 2024 compared to $4.0 million of income for the first half of 2023. The Company recognized $3.1 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the first half of 2024 compared to $3.3 million of investment income in the first half of 2023. In addition, the Company reported foreign exchange losses of $0.4 million in the first half of 2024 versus $0.1 million of foreign exchange gains in the first half of 2023. The Company also reported $0.2 million of higher net periodic pension income in the first half of 2024 versus the first half of 2023.
Current report
Segment Results
Current report
Surfactants
Current report
Surfactants net sales for the first half of 2024 decreased $88.9 million, or 10 percent, versus net sales for the first half of 2023. Lower average selling prices negatively impacted the change in net sales by $118.7 million. The lower average selling prices were mainly due to declining raw material costs, less favorable product mix and increased competitive activity within the European and Latin American end-markets. Sales volume increased three percent and positively impacted the change in net sales by $23.0 million. Foreign currency translation had a $6.8 million favorable impact on the year-over-year change in net sales. A year-over-year comparison of net sales by region follows:
Current report
Net sales for North American operations decreased $58.5 million, or 12 percent, year-over-year. Lower average selling prices had a $38.4 million unfavorable impact on the change in net sales and were primarily attributable to the pass-through of lower raw material costs and less favorable product mix. Sales volume declined four percent and negatively impacted the change in net sales by $19.9 million. The decrease in sales volume primarily reflects lower demand for products sold into the agricultural end markets due to customer and channel inventory destocking. In addition, sales volume into the personal care end markets was negatively impacted by operational issues, partially related to a flood event at the Millsdale, Illinois plant site, during the first half of 2024. Higher demand for products sold into the oil field, construction and industrial solutions, and to our distribution partners partially offset the aforementioned decline. Foreign currency translation negatively impacted the year-over-year change in net sales by $0.2 million.
Current report
Net sales for Latin American operations increased $2.1 million, or one percent, primarily due to a 16 percent increase in sales volume and the favorable impact of foreign currency translation. These items positively impacted the change in net sales by $25.0 million and $6.4 million, respectively. The higher sales volume was primarily due to higher demand for products sold into the consumer products end markets and to our distribution partners. A weaker U.S. dollar relative to the Mexican and Colombian pesos led to the favorable foreign currency translation effect. Lower average selling prices negatively impacted the change in net sales by $29.3 million and primarily reflect less favorable product mix, lower raw material costs and increased competitive activity within certain end-use markets.
Current report
Net sales for Asian operations decreased $6.9 million, or 22 percent, year-over-year. Lower average selling prices, a five percent decline in sales volume, and the unfavorable impact of foreign currency translation negatively impacted the year-over-year change in net sales by $4.5 million, $1.7 million and $0.7 million, respectively. The decline in average selling prices primarily reflects the pass-through of lower raw material costs and the decline in volume primarily reflects less demand for products sold into the commodity laundry and cleaning end markets.
Current report
Surfactant operating income for the first half of 2024 increased $0.9 million, or two percent, versus operating income for the first half of 2023. Gross profit decreased $0.1 million, and operating expenses decreased $1.0 million, or two percent. Year-over-year comparisons of gross profit by region and total segment operating expenses and operating income follow:
Current report
Gross profit for North American operations decreased $7.7 million, or 13 percent, versus the prior year primarily due to lower average unit margins and a four percent decline in sales volume. These items negatively impacted the year-over-year change in gross profit by $5.4 million and $2.3 million, respectively. The lower average unit margins were mostly attributable to less favorable product mix, higher pre-operating expenses associated with the alkoxylation production facility that is being built in Pasadena, Texas and higher expenses incurred at the Company's Millsdale, Illinois plant site due to operational issues, partially related to a flood event, during the first half of 2024.
Current report
Gross profit for Latin American operations increased $5.5 million, or 38 percent, due to improved average unit margins, sales volume growth of 16 percent and the favorable impact of foreign currency translation. These items positively impacted the year-over-year change in gross profit by $2.7 million, $2.3 million and $0.5 million, respectively. The higher average unit margins were primarily due to a more favorable product mix.
Current report
Gross profit for Asian operations increased $2.6 million, primarily due to higher average unit margins that positively impacted the year-over-year change in gross profit by $2.7 million. The higher average unit margins were primarily due to lower overhead costs due to the timing of production runs. The five percent decline in sales volume negatively impacted the year-over-year change in gross profit by $0.1 million.
Current report
Operating expenses for the Surfactant segment decreased $1.0 million, or two percent, year-over-year. This decrease was mainly attributable to lower salaries and bad debt provision expenses.
Current report
Polymers
Current report
Polymer net sales for the first half of 2024 decreased $20.4 million, or six percent, versus net sales for the same period of 2023. Lower average selling prices negatively impacted the change in net sales by $31.7 million. A two percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $5.4 million and $5.9 million, respectively. A year-over-year comparison of net sales by region follows:
Current report
Polymer operating income for the first half of 2024 decreased $4.3 million, or 17 percent, versus operating income for the first half of 2023. Gross profit decreased $4.5 million, or 11 percent, and operating expenses decreased $0.1 million, or one percent. Year-over-year comparisons of gross profit by region and total segment operating expenses and operating income follow:
Current report
Gross profit for North American operations decreased $2.6 million, or 14 percent, due to lower average unit margins and a four percent decline in sales volume. These items negatively impacted the change in gross profit by $1.8 million and $0.8 million, respectively. The lower average unit margins largely reflect a non-cash phthalic anhydride related catalyst write-off ($2.1 million) and higher expenses incurred at the Company's Millsdale, Illinois plant due to operational issues during the first half of 2024.
Current report
Gross profit for European operations decreased $3.6 million, or 18 percent, versus the first half of 2023. This decrease was primarily due to lower average unit margins that negatively impacted the change in gross profit by $4.9 million. A four percent increase in sales volume and the favorable effect of foreign currency translation positively impacted the year-over-year change in gross profit by $0.7 million and $0.6 million, respectively.
Current report
Gross profit for Asia and Other operations increased $1.8 million, primarily due to higher average unit margins and a 22 percent increase in sales volume. These items positively impacted the change in gross profit by $1.6 million and $0.3 million, respectively. Foreign currency translation had a $0.1 million unfavorable impact on the change in gross profit year-over-year.
Current report
Operating expenses for the Polymers segment decreased $0.1 million, or one percent, year-over-year.
Showing the first 40 of 44 passages. Open the source sections for the rest.
Removed paragraphs (7)
Previous report
Operating income in the first quarter of 2024 decreased $0.9 million, or four percent, versus operating income in the first quarter of 2023. Surfactant and Polymer operating income decreased $1.0 million and $1.6 million, respectively, versus the first quarter of 2023. Specialty Products operating income increased $1.7 million versus the first quarter of 2023. Corporate expenses, including business restructuring, environmental remediation and deferred compensation expenses were flat year-over-year. Corporate expenses, excluding business restructuring, environmental remediation and deferred compensation expenses, decreased $1.2 million, or seven percent year-over-year. Foreign currency translation had a $0.7 million favorable impact on operating income in the first quarter of 2024 versus the prior year.
Previous report
Selling expenses decreased $1.7 million, or 13 percent, primarily due to lower salaries, travel-related and bad debt expenses.
Previous report
Net sales for Latin American operations decreased $3.2 million, or four percent, primarily due to lower average selling prices that negatively impacted the change in net sales by $22.9 million. The lower average selling prices primarily reflect less favorable product mix, the pass-through of lower raw material costs and increased competitive pressures from imports. Sales volume increased 16 percent and positively impacted the change in net sales by $13.3 million. The sales volume improvement was primarily due to higher demand for products sold into the consumer products end markets and to our distribution customers, partially offset by lower demand for products sold into the agricultural and industrial cleaning end markets. A weaker U.S. dollar relative to all currencies within the region led to an $6.4 million positive foreign currency translation effect.
Previous report
Gross profit for European operations decreased $1.9 million, or 19 percent, primarily due to lower average unit margins that negatively impacted the year-over-year change in gross profit by $2.0 million. The lower average unit margins primarily reflect less favorable product mix and increased competitive activity within certain end-use markets. Foreign currency translation positively impacted the change in gross profit by $0.1 million.
Previous report
Polymers net sales for the first quarter of 2024 decreased $15.6 million, or 10 percent, versus net sales for the same period of 2023. Lower average selling prices negatively impacted the change in net sales by $22.0 million. Foreign currency translation and a one percent increase in sales volume positively impacted the change in net sales by $4.1 million and $2.3 million, respectively. A comparison of net sales by region follows:
Previous report
Gross profit for North American operations decreased $1.5 million, or 24 percent, due to lower average unit margins and the five percent decline in sales volume. These items negatively impacted the change in gross profit by $1.2 million and $0.3 million, respectively. The lower average unit margins largely reflect higher maintenance, tolling fees and waste water disposal costs incurred at the Company's Millsdale, Illinois plant site due to operational interruptions during the first quarter of 2024.
Previous report
Gross profit for European operations decreased $1.3 million, or 13 percent, versus the first quarter of 2023. The decrease was primarily due to lower average unit margins that negatively impacted the change in gross profit by $2.2 million. Foreign currency translation and a four percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.5 million and $0.4 million, respectively.
Reworded paragraphs (48)
Previous wording
Surfactants – Surfactants, which accounted for 71 percent of consolidated net sales for the first three months of 2024, are principal ingredients in consumer and industrial cleaning and disinfection products such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Other applications include fabric softeners, germicidal quaternary compounds, disinfectants, lubricating ingredients, emulsifiers for spreading agricultural products and industrial applications such as latex systems, plastics and composites. Surfactants are manufactured at five sites in the United States, two European sites (United Kingdom and France), five Latin American sites (one site in Colombia and two sites in each of Mexico and Brazil) and two Asian sites (Philippines and Singapore).
Current wording
Surfactants – Surfactants, which accounted for 69 percent of consolidated net sales for the first six months of 2024, are principal ingredients in consumer and industrial cleaning and disinfection products such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Other applications include fabric softeners, germicidal quaternary compounds, disinfectants, lubricating ingredients, emulsifiers for spreading agricultural products and industrial applications such as latex systems, plastics and composites. Surfactants are manufactured at five sites in the United States, two European sites (United Kingdom and France), five Latin American sites (one site in Colombia and two sites in each of Mexico and Brazil) and two Asian sites (Philippines and Singapore).
Previous wording
Polymers – Polymers, which accounted for 26 percent of consolidated net sales for the first three months of 2024, include polyurethane polyols, polyester resins and phthalic anhydride. Polyurethane polyols are used in the manufacture of rigid foam for thermal insulation in the construction industry and are also a base raw material for coatings, adhesives, sealants and elastomers (collectively, CASE products). Powdered polyester resins are used in coating applications. CASE and powdered polyester resins are collectively referred to as specialty polyols. Phthalic anhydride is used in unsaturated polyester resins, alkyd resins and plasticizers for applications in construction materials and components of automotive, boating and other consumer products. In addition, the Company uses phthalic anhydride internally in the production of polyols. In the United States, polyurethane polyols are manufactured at the Company’s Elwood, Illinois (Millsdale) and Wilmington, North Carolina sites. Phthalic anhydride is manufactured at the Company’s Millsdale site and specialty polyols are manufactured at the Company’s Columbus, Georgia, site. In Europe, polyurethane polyols are manufactured at the Company’s plants in Germany and the Netherlands and specialty polyols are manufactured at the Company’s Poland site. In Asia, polyurethane polyols and specialty polyols are manufactured at the Company’s China plant.
Current wording
Polymers – Polymers, which accounted for 28 percent of consolidated net sales for the first six months of 2024, include polyurethane polyols, polyester resins and phthalic anhydride. Polyurethane polyols are used in the manufacture of rigid foam for thermal insulation in the construction industry and are also a base raw material for coatings, adhesives, sealants and elastomers (collectively, CASE products). Powdered polyester resins are used in coating applications. CASE and powdered polyester resins are collectively referred to as specialty polyols. Phthalic anhydride is used in unsaturated polyester resins, alkyd resins and plasticizers for applications in construction materials and components of automotive, boating and other consumer products. In addition, the Company uses phthalic anhydride internally in the production of polyols. In the United States, polyurethane polyols are manufactured at the Company’s Elwood, Illinois (Millsdale) and Wilmington, North Carolina sites. Phthalic anhydride is manufactured at the Company’s Millsdale site and specialty polyols are manufactured at the Company’s Columbus, Georgia, site. In Europe, polyurethane polyols are manufactured at the Company’s plants in Germany and the Netherlands and specialty polyols are manufactured at the Company’s Poland site. In Asia, polyurethane polyols and specialty polyols are manufactured at the Company’s China plant.
Previous wording
Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first three months of 2024, include flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications. Specialty products are primarily manufactured at the Company’s Maywood, New Jersey, site and, in some instances, by third-party contractors.
Current wording
Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first six months of 2024, include flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications. Specialty products are primarily manufactured at the Company’s Maywood, New Jersey, site.
Previous wording
The Company’s foreign subsidiaries transact business and report financial results in their respective local currencies. As a result, foreign subsidiary income statements are translated into U.S. dollars at average foreign exchange rates appropriate for the reporting period. Because foreign exchange rates fluctuate against the U.S. dollar over time, foreign currency translation affects period-to-period comparisons of financial statement items (i.e., because foreign exchange rates fluctuate, similar period-to-period local currency results for a foreign subsidiary may translate into different U.S. dollar results). The following table presents the effects that foreign currency translation had on the period-over-period changes in consolidated net sales and various income statement line items for the three months ended March 31, 2024 and 2023:
Current wording
The Company’s foreign subsidiaries transact business and report financial results in their respective local currencies. As a result, foreign subsidiary income statements are translated into U.S. dollars at average foreign exchange rates appropriate for the reporting period. Because foreign exchange rates fluctuate against the U.S. dollar over time, foreign currency translation affects period-to-period comparisons of financial statement items (i.e., because foreign exchange rates fluctuate, similar period-to-period local currency results for a foreign subsidiary may translate into different U.S. dollar results). The following table presents the effects that foreign currency translation had on the period-over-period changes in consolidated net sales and various income statement line items for the three and six months ended June 30, 2024 and 2023:
Previous wording
Net income in the first quarter of 2024 was $13.9 million, or $0.61 per diluted share, versus $16.1 million, or $0.70 per diluted share, in the first quarter of 2023. Adjusted net income was $14.7 million, or $0.64 per diluted share, versus $16.4 million, or $0.71 per diluted share in the first quarter of 2023 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share). Earnings before interest, taxes, depreciation and amortization (EBITDA) was $50.2 million in the first quarter of 2024 versus $48.3 million in the first quarter of 2023. Adjusted EBITDA was $51.2 million, up five percent, versus $48.7 million in the first quarter of 2023 (see the "Reconciliation of non-GAAP EBITDA and Adjusted EBITDA" section of this MD&A for a reconciliation between reported operating income and non-GAAP EBITDA and adjusted EBITDA). Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the first quarter of 2024 compared to the first quarter of 2023. A detailed discussion of segment operating performance for the first quarter of 2024 compared to the first quarter of 2023 follows the summary.
Current wording
Net income in the second quarter of 2024 was $9.5 million, or $0.42 per diluted share, versus $12.7 million, or $0.55 per diluted share, in the second quarter of 2023. Adjusted net income was $9.4 million, or $0.41 per diluted share, versus $12.1 million, or $0.53 per diluted share in the second quarter of 2023 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share). Earnings before interest, taxes, depreciation and amortization (EBITDA) were $47.9 million in the second quarter of 2024, up three percent, versus $46.7 million in the second quarter of 2023. Adjusted EBITDA was $47.7 million, up four percent, versus $45.8 million in the second quarter of 2023 (see the "Reconciliation of non-GAAP EBITDA and Adjusted EBITDA" section of this MD&A for a reconciliation between reported operating income and non-GAAP EBITDA and adjusted EBITDA). Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the second quarter of 2024 compared to the second quarter of 2023. A detailed discussion of segment operating performance for the second quarter of 2024 compared to the second quarter of 2023 follows the summary.
Previous wording
Consolidated net sales decreased $100.0 million, or 15 percent, versus the prior year quarter. Lower average selling prices negatively impacted the year-over-year change in net sales by $115.5 million. The decrease in average selling prices was mainly attributable to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity primarily within the European and Latin American end-markets. Consolidated sales volume increased one percent, which favorably impacted the change in net sales by $3.7 million. Surfactant sales volume was flat year-over-year while sales volume in the Polymer and Specialty Products segments increased one percent and 11 percent, respectively. Foreign currency translation favorably impacted the year-over-year change in net sales by $11.8 million due to a weaker U.S. dollar against most currencies in foreign locations where the Company has operations.
Current wording
Consolidated net sales decreased $23.6 million, or four percent, versus the prior year quarter. Lower average selling prices negatively impacted the year-over-year change in net sales by $49.7 million. The decrease in average selling prices was mainly attributable to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity within Latin American end-markets. Consolidated sales volume increased four percent, which favorably impacted the change in net sales by $25.3 million. Surfactant and Polymer sales volume increased five and two percent, respectively, while sales volume in the Specialty Products segment declined two percent. Foreign currency translation favorably impacted the year-over-year change in net sales by $0.8 million.
Previous wording
Operating expenses (including deferred compensation and business restructuring) decreased $2.4 million, or five percent, versus the prior year quarter. Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:
Current wording
Operating expenses (including deferred compensation and business restructuring) increased $2.3 million, or five percent, versus the prior year quarter. Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:
Previous wording
Deferred compensation was $1.8 million of expense in the first quarter of 2024 versus $1.5 million of expense in the prior year quarter. The $0.3 million increase in deferred compensation expense was primarily due to a larger increase in the market value of mutual fund investment assets held for the plans during the first quarter of 2024 versus the first quarter of 2023. See the Overview and Segment Results-Corporate Expenses section of this MD&A for further details.
Current wording
Deferred compensation was $0.4 million of expense in the second quarter of 2024 versus $0.7 million of expense in the prior year quarter. The $0.3 million decrease in deferred compensation expense was primarily due to a smaller appreciation in the market value of mutual fund investment assets held for the plans during the second quarter of 2024 versus the second quarter of 2023. See the Overview and Segment Results-Corporate Expenses section of this MD&A for further details.
Previous wording
Other, net was $2.4 million of income in the first quarter of 2024 versus $1.7 million of income in the first quarter of 2023. The Company recognized $2.3 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the first quarter of 2024 compared to $1.7 million of investment income in the first quarter of 2023. The Company's net periodic pension income was $0.4 million in the first quarter of 2024 versus $0.3 million of income in the first quarter of 2023. In addition, the Company reported $0.4 million of foreign exchange losses in the first quarter of 2024 versus $0.3 million of foreign exchange losses in the first quarter of 2023.
Current wording
Other, net was $1.2 million of income in the second quarter of 2024 versus $2.4 million of income in the second quarter of 2023. The Company recognized $0.8 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the second quarter of 2024 compared to $1.6 million of investment income in the second quarter of 2023. The Company's net periodic pension income was $0.4 million in the second quarter of 2024 versus $0.3 million of income in the second quarter of 2023. In addition, the Company reported less than $0.1 million of foreign exchange losses in the second quarter of 2024 versus $0.4 million of foreign exchange gains in the second quarter of 2023.
Previous wording
Surfactant net sales for the first quarter of 2024 decreased $77.0 million versus net sales for the first quarter of 2023. Lower average selling prices negatively impacted the change in net sales by $85.6 million. The lower average selling prices were mainly attributable to declining raw material costs, less favorable product mix and increased competitive activity within the European and Latin American end-markets. Sales volume was relatively flat year-over-year and positively impacted the change in net sales by $0.9 million. Foreign currency translation had a $7.7 million favorable impact on the year-over-year change in net sales. A comparison of net sales by region follows:
Current wording
Surfactant net sales for the second quarter of 2024 decreased $11.9 million versus net sales for the second quarter of 2023. Lower average selling prices negatively impacted the change in net sales by $31.8 million. The lower average selling prices were mainly attributable to declining raw material costs, less favorable product mix and increased competitive activity within Latin American end-markets. Sales volume increased five percent year-over-year and positively impacted the change in net sales by $20.8 million. Foreign currency translation had a $0.9 million unfavorable impact on the year-over-year change in net sales. A comparison of net sales by region follows:
Previous wording
Net sales for North American operations decreased $47.5 million, or 17 percent, year-over-year. Lower average selling prices had a $32.5 million unfavorable impact on the change in net sales and were primarily due to the pass-through of lower raw material costs and less favorable product mix. Sales volume declined five percent and negatively impacted the change in net sales by $15.0 million. The lower sales volume was primarily due to lower demand for products sold into the agricultural end market due to continued customer and channel inventory destocking. Higher demand for products sold into the personal care end markets, driven by prior year investments in low 1,4 dioxane, along with higher demand in the industrial cleaning and oil field end markets partially offset the lower agricultural demand.
Current wording
Net sales for North American operations decreased $11.0 million, or five percent, year-over-year. Lower average selling prices had a $5.5 million unfavorable impact on the change in net sales and were primarily due to the pass-through of lower raw material costs and less favorable product mix. Sales volume declined two percent and negatively impacted the change in net sales by $5.3 million. The lower sales volume was primarily due to lower demand for products sold into the industrial cleaning and agricultural end markets. In addition, sales volume into the personal care end markets was negatively impacted by operational disruptions, primarily related to a flood event at the Millsdale, Illinois plant site, during the second quarter of 2024. Higher demand for products sold into the laundry and cleaning end markets, the oil field end markets and to our distribution partners, partially offset the above. Foreign currency translation negatively impacted the change in net sales by $0.2 million.
Previous wording
Surfactant operating income for the first quarter of 2024 decreased $1.0 million, or four percent, versus operating income for the first quarter of 2023. Gross profit decreased $2.4 million, or five percent, and operating expenses decreased $1.5 million, or six percent. Comparisons of gross profit by region and total segment operating expenses and operating income follow:
Current wording
Surfactant operating income for the second quarter of 2024 increased $1.9 million, or 13 percent, versus operating income for the second quarter of 2023. Gross profit increased $2.3 million, or six percent, and operating expenses increased $0.4 million, or two percent. Comparisons of gross profit by region and total segment operating expenses and operating income follow:
Previous wording
Gross profit for North American operations decreased $3.8 million, or 11 percent, versus the prior year primarily due to lower average unit margins and a five percent decline in sales volume. These items negatively impacted the year-over-year change in gross profit by $1.9 million each. The lower average unit margins were primarily attributable to less favorable product mix, higher pre-operating expenses associated with the alkoxylation production facility that is being built in Pasadena, Texas and higher expenses incurred at the Company's Millsdale, Illinois plant site, inclusive of waste water disposal costs, due to operational interruptions during the first quarter of 2024.
Current wording
Gross profit for North American operations decreased $3.9 million, or 16 percent, versus the prior year primarily due to lower average unit margins and a two percent decline in sales volume. These items negatively impacted the year-over-year change in gross profit by $3.3 million and $0.6 million, respectively. The lower average unit margins were primarily attributable to less favorable product mix, higher pre-operating expenses associated with the alkoxylation production facility that is being built in Pasadena, Texas and higher expenses incurred at the Company's Millsdale, Illinois plant site due to operational issues, primarily related to a flood event, during the second quarter of 2024.
Previous wording
Gross profit for Asia operations increased $1.7 million year-over-year due to higher average unit margins. The higher average unit margins reflect a more favorable product mix and lower overhead costs due to the timing of production runs.
Current wording
Gross profit for Asia operations increased $0.9 million, or 43 percent, year-over-year primarily due to higher average unit margins and an eight percent increase in sales volume. These items positively impacted the year-over-year change in gross profit by $0.7 million and $0.2 million, respectively. The higher average unit margins reflect a more favorable product mix and lower overhead costs due to the timing of production runs.
Previous wording
Operating expenses for the Surfactants segment decreased $1.5 million, or six percent, in the first quarter of 2024 versus the first quarter of 2023. This decrease was mostly attributable to lower salaries, travel-related and bad debt expenses.
Current wording
Operating expenses for the Surfactants segment increased $0.4 million, or two percent, in the second quarter of 2024 versus the second quarter of 2023.
Previous wording
Net sales for Asian operations decreased $5.9 million, or 32 percent, versus the prior year quarter. A 17 percent decline in sales volume and lower average selling prices negatively impacted the change in net sales by $3.1 million and $2.6 million, respectively. Foreign currency translation negatively impacted the change in net sales by $0.2 million.
Current wording
Polymer net sales for the second quarter of 2024 decreased $4.8 million, or three percent, versus net sales for the same period of 2023. Lower average selling prices negatively impacted the change in net sales by $9.6 million. A two percent increase in sales volume and the favorable impact of foreign currency translation positively impacted the change in net sales by $3.1 million and $1.7 million, respectively. A comparison of net sales by region follows:
Previous wording
Polymer operating income in the first quarter of 2024 decreased $1.6 million, or 16 percent, versus operating income in the first quarter of 2023. Gross profit decreased $2.2 million, or 13 percent and operating expenses decreased $0.6 million or nine percent between years. Comparisons of gross profit by region and total segment operating expenses and operating income follow:
Current wording
Polymer operating income in the second quarter of 2024 decreased $2.7 million, or 17 percent, versus operating income in the second quarter of 2023. Gross profit decreased $2.2 million, or 10 percent and operating expenses increased $0.5 million or eight percent between years. Comparisons of gross profit by region and total segment operating expenses and operating income follow:
Previous wording
Gross profit for Latin American operations increased $1.6 million, or 22 percent, primarily due to the 16 percent increase in sales volume and the favorable impact of foreign currency translation. These items positively impacted the year-over-year change in gross profit by $1.2 million and $0.7 million, respectively. Lower average unit margins negatively impacted the change in gross profit by $0.3 million and primarily reflect a less favorable product mix and competitive pricing pressures from imports.
Current wording
Gross profit for Asia and Other operations increased $1.3 million primarily due to higher average unit margins and a 28 percent increase in sales volume. These items positively impacted the change in gross profit by $1.2 million and $0.2 million, respectively. Foreign currency translation negatively impacted the year-over-year change in gross profit by $0.1 million.
Previous wording
Operating expenses for the Polymer segment decreased $0.6 million, or nine percent, in the first quarter of 2024 versus the first quarter of 2023. This decrease was mainly attributable to lower salary expenses.
Current wording
Operating expenses for the Polymer segment increased $0.5 million, or eight percent, in the second quarter of 2024 compared to the second quarter of 2023.
Previous wording
The $0.3 million increase in deferred compensation expense was primarily due to a larger increase in the market value of mutual fund investment assets held for the plans in the first quarter of 2024 versus the first quarter of 2023. This increase was partially offset by a $4.51 per share decrease in the market price of the Company's common stock in the first quarter of 2024 compared to a $3.43 per share decrease in the first quarter of 2023. The following table presents the quarter-end Company common stock market prices used in the computation of deferred compensation income/expense for the three months ended March 31, 2024 and 2023:
Current wording
The $0.3 million decrease in deferred compensation expense was primarily due to a smaller increase in the market value of mutual fund investment assets held for the plans in the second quarter of 2024 versus the second quarter of 2023. This decrease was partially offset by a $6.08 per share decrease in the market price of the Company's common stock in the second quarter of 2024 compared to a $7.47 per share decrease in the second quarter of 2023. The following table presents the quarter-end Company common stock market prices used in the computation of deferred compensation income/expense for the three months ended June 30, 2024 and 2023:
Previous wording
Administrative expenses were flat year-over-year. Lower salaries and hiring-related expenses were offset by higher environmental reserve expenses. The higher environmental expense reflects a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts.
Current wording
Administrative expenses increased $2.0 million, or four percent, year-over-year. The increase was primarily driven by a $3.5 million expense recognized for a criminal social engineering scheme impacting one of the Company's subsidiaries in Asia and higher environmental reserve expenses. The higher environmental expense reflects a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts. Lower salaries, resulting from productivity measures implemented in late 2023, partially offset the above.
Previous wording
Research, development and technical service (R&D) expenses decreased $0.9 million, or six percent, primarily due to lower salaries.
Current wording
R&D expenses decreased $0.9 million, or three percent, year-over-year primarily due to lower salaries.
Previous wording
Net interest expense for the first quarter of 2024 increased $0.2 million, or nine percent, versus the first quarter of 2023. This increase was primarily attributable to higher interest rates on borrowings under the Company's revolving credit facility during the first quarter of 2024 versus 2023, partially offset by higher capitalized interest and non-U.S. interest income.
Current wording
Net interest expense for the first half of 2024 decreased $1.0 million, or 14 percent, versus the first half of 2023. This decrease was primarily attributable to higher non-U.S. interest income recognition and higher capitalized interest income, partially offset by higher U.S. interest expense.
Previous wording
The Company’s effective tax rate was 28.6 percent in the first quarter of 2024 versus 18.9 percent in the first quarter of 2023. The increase was primarily attributable to the Company’s intention to elect “Bonus Depreciation” for its new alkoxylation facility that is being built in Pasadena, Texas and expected to start up in the fourth quarter of 2024. As a result of this election, the Company is expected to lose its ability to use its global intangible low-taxed income (GILTI) deduction and related GILTI foreign tax credits for 2024, resulting in a higher effective tax rate. The Organisation for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15 percent on reported profits (entitled "Pillar Two"). The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.
Current wording
The Company’s effective tax rate was 36.1 percent in the first half of 2024 versus 20.4 percent in the first half of 2023. The increase was primarily attributable to the Company’s intention to elect “Bonus Depreciation” for its new alkoxylation facility that is being built in Pasadena, Texas and expected to start up in the fourth quarter of 2024. As a result of this election, the Company is expected to lose its ability to use its global intangible low-taxed income (GILTI) deduction, related GILTI foreign tax credits, and its income deduction (FDII) for 2024, resulting in a higher effective tax rate. In addition, the Company’s current and forecasted geographic mix of income has driven the effective tax rate higher. The Organisation for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15 percent on reported profits (entitled "Pillar Two"). The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.
Previous wording
Net sales for European operations decreased $20.3 million, or 22 percent, primarily due to lower average selling prices that negatively impacted the change in net sales by $22.2 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity within certain end-use markets. Foreign currency translation positively impacted the change in net sales by $1.5 million. A weaker U.S. dollar relative to the European euro and British pound sterling led to the favorable foreign currency translation effect. Sales volume was up slightly year-over-year and positively impacted the change in net sales by $0.4 million. Higher demand for products sold to our distribution partners and into the industrial cleaning and personal care end markets was mostly offset by lower demand for products sold into the agricultural and the laundry and cleaning end markets.
Current wording
Net sales for European operations decreased $25.6 million, or 16 percent, primarily due to lower average selling prices that negatively impacted the change in net sales by $37.9 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity within certain end-use markets. Sales volume was up 7 percent and positively impacted the change in net sales by $11.1 million. The higher sales volume was primarily due to higher demand for products sold into the consumer products end markets and to our distribution partners. Foreign currency translation positively impacted the change in net sales by $1.2 million. A weaker U.S. dollar relative to the European euro and British pound sterling led to the favorable foreign currency translation effect.
Previous wording
Gross profit for Asia and Other operations increased $0.5 million, or 63 percent, primarily due to higher average unit margins and a 16 percent increase in sales volume. These items positively impacted the change in gross profit by $0.5 million and $0.1 million, respectively. The unfavorable impact of foreign currency translation negatively impacted the year-over-year change in gross profit by $0.1 million.
Current wording
Gross profit for European operations decreased $0.5 million, or three percent, primarily due to lower average unit margins that negatively impacted the change in gross profit by $1.6 million. Sales volume growth of seven percent and the favorable impact of foreign currency translation positively impacted the year-over-year change in gross profit by $1.0 million and $0.1 million, respectively.
Previous wording
Net sales for North American operations decreased $11.4 million, or 14 percent, due to lower average selling prices and a five percent decrease in sales volume. These items negatively impacted the year-over-year change in net sales by $7.6 million and $3.8 million, respectively. The lower average selling prices primarily reflect the pass-through of lower raw material costs. Sales volume of polyols used in rigid foam applications increased five percent year-over-year but was more than offset by a 43 percent decline within the commodity phthalic anhydride business due largely to operational interruptions at the Millsdale, Illinois plant during the first quarter of 2024.
Current wording
Net sales for North American operations decreased $19.7 million, or 12 percent, due to lower average selling prices and a four percent decrease in sales volume. These items negatively impacted the year-over-year change in net sales by $12.5 million and $7.2 million, respectively. The lower average selling prices primarily reflect the pass-through of lower raw material costs. Sales volume of polyols used in rigid foam applications and specialty polyols increased one percent and nine percent, respectively year-over-year. These increases were more than offset by a 47 percent decrease within the commodity phthalic anhydride business due to operational issues at the Millsdale, Illinois plant during the first half of 2024.
Previous wording
Net sales for European operations decreased $5.2 million, or eight percent, versus the first three months of 2023. This decrease was primarily due to lower average selling prices that negatively impacted the year-over-year change in net sales by $12.8 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs and increased competitive activity. Foreign currency translation and a four percent increase in sales volume positively impacted the change in net sales by $4.7 million and $2.9 million, respectively. A weaker U.S. dollar relative to the Polish zloty and British pound sterling led to the favorable foreign currency translation effect.
Current wording
Net sales for European operations decreased $3.7 million, or three percent, year-over-year. Lower average selling prices negatively impacted the year-over-year change in net sales by $15.3 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs and increased competitive activity. Foreign currency translation and a four percent increase in sales volume positively impacted the change in net sales by $6.8 million and $4.8 million, respectively. A weaker U.S. dollar relative to the Polish zloty and British pound sterling led to the favorable foreign currency translation effect.
Previous wording
Net sales for Asia and Other operations increased $0.9 million, or eight percent, primarily due to a 16 percent increase in sales volume which positively impacted the year-over-year change in net sales by $1.7 million. The higher sales volume was largely driven by the non-recurrence of COVID lock downs and restrictions that were in place in China during the first quarter of 2023 and higher demand in specialty polyols resulting from the Company's product diversification efforts. The unfavorable impact of foreign currency translation and lower average selling prices negatively impacted the year-over-year change in net sales by $0.6 million and $0.2 million, respectively.
Current wording
Net sales for Asia and Other operations increased $3.0 million, or 14 percent, primarily due to a 22 percent increase in sales volume which positively impacted the year-over-year change in net sales by $4.6 million. The higher sales volume was driven by the non-recurrence of COVID lock downs and restrictions that were in place in China during the first half of 2023 and higher demand for specialty polyols resulting from the Company's product diversification efforts. The unfavorable impact of foreign currency translation and lower average selling prices negatively impacted the year-over-year change in net sales by $1.0 and $0.6 million, respectively.
Previous wording
Specialty Products net sales for the first quarter of 2024 decreased $7.4 million, or 33 percent, versus net sales for the first quarter of 2023. The decrease was due to lower average selling prices that more than offset an 11 percent increase in sales volume. Gross profit and operating income increased by $1.6 million and $1.7 million, respectively, year-over-year. The year-over-year increases in gross profit and operating income were mostly attributable to higher unit margins and sales volume within the medium chain triglycerides (MCT) product line.
Current wording
Specialty Products net sales for the first half of 2024 decreased $14.3 million, or 31 percent, versus net sales for the first half of 2023. This decrease was primarily due to lower average selling prices that were partially offset by a four percent increase in sales volume. Gross profit and operating income increased $5.0 million and $5.3 million, respectively, year-over-year. The year-over-year increases in gross profit and operating income were mostly attributable to higher unit margins within the medium chain triglycerides (MCT) product line The higher average unit margins reflect the non-recurrence of high-cost inventory carryover experienced in the prior year.
Previous wording
Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, were relatively flat year-over-year. Corporate expenses were $18.6 million in the first quarter of 2024 versus $18.5 million in the first quarter of 2023. Deferred compensation and environmental reserve expenses were up $0.3 million and $1.1 million, respectively, year-over-year. The higher environmental reserve expense reflects a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts. These higher expenses were mostly offset by lower salaries and hiring-related expenses due to productivity efforts implemented in late 2023.
Current wording
Corporate expenses, which include deferred compensation, business restructuring, and other operating expenses that are not allocated to the reportable segments, increased $1.9 million, or five percent, between years. The year-over-year increase was primarily attributable to $3.5 million of expenses associated with a criminal social engineering scheme impacting one of the Company's subsidiaries in Asia. See Note 17, Other Matter, of the notes to the Company's consolidated financial statements for additional details regarding the criminal social engineering scheme. Higher environmental reserve expenses also contributed to the year-over-year increase. Environmental reserve expenses were $1.8 million in the first half of 2024 versus $0.5 million in the first half of 2023. The higher environmental expenses in 2024 reflect a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts. These increases were partially offset by lower salaries, related to productivity measures implemented in late 2023, and lower insurance and legal expenses.
Previous wording
For the three months ended March 31, 2024, operating activities were a cash source of $41.6 million versus a cash use of $72.1 million for the comparable period in 2023. For the first three months of 2024, investing cash outflows totaled $24.4 million versus cash outflows of $90.3 million in the prior year period. Financing activities were a cash use of $20.0 million versus a cash source of $113.5 million in the prior year period.
Current wording
For the six months ended June 30, 2024, operating activities were a cash source of $71.1 million versus a cash source of $35.8 million for the comparable period in 2023. For the first six months of 2024, investing cash outflows totaled $54.0 million versus cash outflows of $158.2 million in the prior year period. Financing activities were a cash use of $16.0 million versus a cash source of $78.0 million in the prior year period.
Previous wording
Cash and cash equivalents decreased $4.0 million compared to December 31, 2023, inclusive of a $1.2 million unfavorable foreign exchange rate impact. On March 31, 2024, the Company's cash and cash equivalents totaled $125.8 million. Cash in U.S. demand deposit accounts totaled $2.7 million. The Company’s non-U.S. subsidiaries held $123.1 million of cash as of March 31, 2024.
Current wording
Cash and cash equivalents decreased $5.1 million compared to December 31, 2023, inclusive of a $6.1 million unfavorable foreign exchange rate impact. On June 30, 2024, the Company's cash and cash equivalents totaled $124.7 million including $11.3 million in money market funds, which were rated AAAm by Standard and Poor’s and Aaa-mf by Moody’s. Cash in U.S. demand deposit accounts totaled $2.2 million, and cash and cash equivalents of the Company’s non-U.S. subsidiaries totaled $122.5 million (including UK money market funds of $11.3 million) as of June 30, 2024.
Previous wording
Net income during the first three months of 2024 decreased $2.2 million versus the comparable period in 2023. Working capital was a cash use of $2.8 million during the first three months of 2024 versus a cash use of $109.9 million in the comparable period in 2023.
Current wording
Net income during the first six months of 2024 decreased $5.4 million versus the comparable period in 2023. Working capital was a cash use of $15.5 million during the first six months of 2024 versus a cash use of $33.2 million in the comparable period in 2023.
Previous wording
Accounts receivable were a cash use of $26.0 million during the first three months of 2024 compared to a cash use of $40.4 million for the comparable period in 2023. Inventories were a cash source of $3.2 million in 2024 versus a cash source of $38.3 million in 2023. Accounts payable and accrued liabilities were a cash source of $26.0 million in 2024 compared to a cash use of $98.5 million for the same period in 2023.
Current wording
Accounts receivable was a cash use of $27.3 million during the first six months of 2024 compared to a cash source of $22.8 million for the comparable period in 2023. Inventories were a cash use of $9.7 million in 2024 versus a cash source of $70.1 million in 2023. Accounts payable and accrued liabilities were a cash source of $26.6 million in 2024 compared to a cash use of $116.5 million for the same period in 2023.
Previous wording
Working capital requirements were lower in the first three months of 2024 compared to 2023 primarily due to the changes noted above. The change in accounts receivable working capital primarily reflects lower selling prices due to the pass through of lower raw material costs. The change in inventories reflects unit costs dropping less significantly during the first quarter of 2024 versus 2023. The change in accounts payable and accrued liabilities was due in large part to lower first quarter 2024 cash outlays required to meet lower incentive-based compensation, tax and other year-end obligations closely linked to lower 2023 earnings. It is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2024.
Current wording
Working capital requirements were lower in the first six months of 2024 compared to 2023 primarily due to the changes noted above. The change in inventories working capital primarily reflects the extensive efforts to reduce inventory levels in 2023 (source of cash) versus targeted 2024 inventory builds in advance of the hurricane season and planned plant maintenance turnarounds during the second half of the 2024 (use of cash). The change in accounts payable and accrued liabilities was due in large part to lower 2024 cash outlays required to meet lower incentive-based compensation, tax and other year-end obligations closely linked to lower 2023 earnings. It is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2024.
Previous wording
Cash used for investing activities decreased $65.9 million year-over-year. Cash used for capital expenditures was $30.2 million in the first three months of 2024 versus $92.2 million in the same period of 2023. The lower capital spending in 2024 was largely attributable to reduced spending required to complete construction of the alkoxylation plant the Company is building at its Pasadena, Texas site.
Current wording
Cash used for investing activities decreased $104.2 million year-over-year. Cash used for capital expenditures was $59.9 million in the first six months of 2024 versus $159.9 million in the same period of 2023. The lower capital spending in 2024 was largely attributable to reduced spending required to complete construction of the alkoxylation plant the Company is building at its Pasadena, Texas site.
Previous wording
Cash flow from financing activities was a use of $20.0 million in 2024 versus a source of $113.5 million in 2023. The year-over-year change was primarily due to a lower level of borrowings against the Company's revolving credit facility.
Current wording
Cash flow from financing activities was a use of $16.0 million in 2024 versus a source of $78.0 million in 2023. The year-over-year change was primarily due to a lower level of borrowings against the Company's revolving credit facility.
Previous wording
The Company purchases shares of its common stock in the open market or from its benefit plans from time to time to fund its own benefit plans and to mitigate the dilutive effect of new shares issued under its compensation plans. The Company may, from time to time, seek to purchase additional amounts of its outstanding equity and/or retire debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise, including pursuant to plans meeting the requirements of Rule 10b5-1 promulgated by the SEC. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. The Company did not purchase any shares of its common stock on the open market during the three months ended March 31, 2024. At March 31, 2024, the Company had $125.1 million remaining under the share repurchase program authorized by its Board of Directors.
Current wording
The Company purchases shares of its common stock in the open market or from its benefit plans from time to time to fund its own benefit plans and to mitigate the dilutive effect of new shares issued under its compensation plans. The Company may, from time to time, seek to purchase additional amounts of its outstanding equity and/or retire debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise, including pursuant to plans meeting the requirements of Rule 10b5-1 promulgated by the SEC. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. The Company did not purchase any shares of its common stock on the open market during the six months ended June 30, 2024. At June 30, 2024, the Company had $125.1 million remaining under the share repurchase program authorized by its Board of Directors.
Previous wording
Consolidated balance sheet debt decreased from $654.1 million on December 31, 2023 to $646.0 million on March 31, 2024, primarily due to lower domestic borrowings from the Company’s revolving credit facility and lower foreign credit line borrowings. Net debt (which is defined as total debt minus cash – see the “Reconciliation of Non-GAAP Net Debt” section of this MD&A) decreased $4.1 million, from $524.3 million at December 31, 2023 to $520.2 million at March 31, 2024. This change reflects a debt decrease of $8.1 million and a cash decrease of $4.0 million.
Current wording
Consolidated balance sheet debt increased from $654.1 million on December 31, 2023 to $657.1 million on June 30, 2024, primarily due to domestic borrowings from the Company’s revolving credit facility partially offset by scheduled debt repayments. Net debt (which is defined as total debt minus cash – see the “Reconciliation of Non-GAAP Net Debt” section of this MD&A) increased $8.1 million, from $524.3 million at December 31, 2023 to $532.4 million at June 30, 2024. This change reflects a cash decrease of $5.1 million and a total debt increase of $3.0 million.
Showing the first 40 of 48 pairs. Open the source sections for the rest.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Research, development and technical service (R&D) expenses were flat between quarters.
Current report — wording carried from elsewhere
The Company’s effective tax rate was 44.7 percent in the second quarter of 2024 versus 22.3 percent in the second quarter of 2023. The increase was primarily attributable to the Company’s intention to elect “Bonus Depreciation” for its new alkoxylation facility that is being built in Pasadena, Texas and is expected to start up in the fourth quarter of 2024. As a result of this election, the Company is expected to lose its ability to use its global intangible low-taxed income (GILTI) deduction, related GILTI foreign tax credits, and its foreign-derived intangible income (FDII) deduction for 2024, resulting in a higher effective tax rate. In addition, the Company’s current and forecasted geographic mix of income has driven the effective tax rate higher. The Organisation for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15 percent on reported profits (entitled "Pillar Two"). The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.
Current report — wording carried from elsewhere
Net sales for Asia and Other operations increased $2.1 million, or 20 percent, primarily due to a 28 percent increase in sales volume which positively impacted the year-over-year change in net sales by $2.9 million. The higher sales volume was largely driven by the non-recurrence of COVID lock downs and restrictions that were partially in place during the second quarter of 2023 and higher specialty polyols demand resulting from the Company's product diversification efforts. The unfavorable impact of foreign currency translation and lower average selling prices negatively impacted the year-over-year change in net sales by $0.4 million each.
Current report — wording carried from elsewhere
Specialty Products net sales for the second quarter of 2024 decreased $6.9 million, or 29 percent, versus net sales for the second quarter of 2023. The decrease was due to lower average selling prices and a two percent decrease in sales volume. Gross profit and operating income increased by $3.4 million and $3.5 million, respectively, year-over-year. The year-over-year increases in gross profit and operating income were mostly attributable to higher average unit margins within the medium chain triglycerides (MCT) product line. The higher unit margins reflect the non-recurrence of high-cost inventory carryover experienced in the prior year.
Current report — wording carried from elsewhere
Net income in the first half of 2024 was $23.4 million, or $1.02 per diluted share, versus $28.8 million, or $1.25 per diluted share, in the first half of 2023. Adjusted net income was $24.1 million, or $1.05 per diluted share, versus $28.5 million, or $1.24 per diluted share in the prior year (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share). Earnings before interest, taxes, depreciation and amortization (EBITDA) were $98.0 million in for the first half of 2024 versus $94.9 million in the first half of 2023. Adjusted EBITDA was $98.9 million, up five percent, versus $94.5 million in the first half of 2023 (see the "Reconciliation of non-GAAP EBITDA and Adjusted EBITDA" section of this MD&A for a reconciliation between reported operating income and non-GAAP EBITDA and adjusted EBITDA). Below is a summary discussion of the major factors leading to the year-over-year changes in net sales, expenses and income in the first half of 2024 compared to the first half of 2023. A detailed discussion of segment operating performance for the first half of 2024 compared to the first half of 2023 follows the summary.
Current report — wording carried from elsewhere
Operating expenses (including deferred compensation and business restructuring expenses) were flat between years. Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows: