SCL 10-K & 10-Q changes, risk factors and insider trading

Manufacturing facilities in the Company’s industry are subject to planned and unplanned production slowdowns and shutdowns, turnarounds and outages. Unplanned production disruptions may occur for external reasons, such as natural disasters, weather, disease, pandemic,pandemics, strikes, transportation interruption, government regulation, political unrest or terrorism, or internal reasons, such as fire, explosions, mechanical failure, labor-related work stoppages or slowdowns, maintenance, discharges, contamination, environmental remediation or other manufacturing problems. For example, in 2022,2024, unplannedthe weather-relatedoperations production disruptions atof the Company’s Elwood, Illinois (Millsdale) facility impacted Polymer operations. In 2024, the operations of the Millsdale facility were negatively affected by a flood event. Certain of our production facilities are, and production facilities acquired or built in the future may be, located in areas where unplanned disruptions are more likely. Alternative facilities with sufficient capacity may not be available, may cost substantially more or may take a significant amount of time to increase production or qualify with Company customers, each of which could negatively impact the Company’s business, financial position, results of operations and cash flows. Further, some of the Company’s products cannot currently be made, or made in the volume required, at more than one of the Company’s locations. For some of these products, the Company has access to external market suppliers, but the Company cannot guarantee that these products will be available to it in amounts sufficient to meet its requirements or at a cost that is competitive with the Company’s cost of manufacturing these products. Long-term production disruptions may cause Company customers to seek alternative supply, which could further adversely affect Company profitability.

The costs of raw materials, natural gas and electricity represent a substantial portion of the Company’s operating costs. The principal raw materials used in the Company’s products are petroleum-based or plant-based. Natural gas is used in the Company’s manufacturing sites primarily to generate steam for its manufacturing processes. The prices of many of these raw materials have been and can be subject to periods of rapid and significant instability.instability, particularly during periods of heightened inflation. These fluctuations in prices may be affected by supply and demand factors, such as general economic conditions, regulatory developments with respect to and restrictions on the transport of raw materials (some of which may be viewed as hazardous), currency exchange rates, changes in tariffs, political instability or terrorist attacks, all of which are beyond the Company’s control. For example, most recently in 2022, supply chain disruptions and inflationary pressures have led to increases in raw material prices for the Company, particularly during periods of heightened inflation such as the 2022 timeframe. The Company may not be able to pass increased raw material or energy costs on to customers through increases in product prices as a result of arrangements the Company has with certain customers and competitive pressures in the market. In addition, the Company’s suppliers are subject to planned and unplanned production slowdowns and shutdowns, turnarounds and outages. Unplanned production disruptions may occur for external reasons, such as natural disasters, weather, disease, strikes, transportation interruption, government regulation, political unrest or terrorism, or internal reasons, such as fire, explosions, mechanical failure, labor-related work stoppages or slowdowns, maintenance, discharges, contamination, environmental remediation or other manufacturing problems. Certain of our suppliers’ facilities are located in areas where unplanned disruptions are more likely. In the event of supply disruptions, raw materials may not be available to the Company in amounts sufficient to meet our requirements, and alternative raw materials may not be available, may cost substantially more or may take a significant amount of time for the Company to qualify. If the Company is unable to minimize the effects of increased raw material and energy costs or pass such increased costs on to customers, or manage any interruption to the supply of raw materials or energy, its business, financial position, results of operations and cash flows may be materially and adversely affected.

From time to time, the Company initiates expansion and other significant capital projects. Projects of this type are subject to risks of delay or cost overruns inherent in any large construction project resulting from numerous factors, including the following: shortages of equipment, materials or skilled labor; work stoppages; unscheduled delays in the delivery of ordered materials and equipment; unanticipated cost increases; difficulties in obtaining necessary permits or in meeting permit conditions; difficulties in meeting regulatory requirements or obtaining regulatory approvals; availability of suppliers to certify equipment for existing and enhanced regulations; design and engineering problems; and failure or delay of third-party service providers, civil unrest and labor disputes. For example, in 2022 the Company disclosed that supply chain disruptions and labor shortages had delayed the expected startup of its Pasadena, Texas facility and that cost inflation had increased the expected cost of the project. Significant cost overruns or delays in completing a capital project could have a material adverse effect on the Company’s return on investment, results of operations and cash flows. In addition, if the Company misjudges its future capacity needs, this too could materially and adversely impact its business, financial position, results of operations and cash flows.

For example, increased concerns regarding the safety of 1,4 dioxane in consumer products and its potential impact on human health and the environment may lessen the demand for certain of the Company’s products. 1,4 dioxane is generated as a by-product during the manufacture of certain of the Company’s surfactant products, including alkoxylates and ether sulfates, used by its customers as cleaning agents in household cleaning, personal care and cosmetics products. In their finished form, consumer products that contain ethoxylated surfactants may contain trace amounts of 1,4 dioxane. 1,4 dioxane has been categorized by regulators as a toxic and carcinogenic substance at certain levels. In December 2019, New York adopted a law that, beginning in 2022 and 2023, permitted no more than 2 ppm and 1 ppm, respectively, of 1,4 dioxane in cleaning and personal care products and 10 ppm in cosmetics products. California has published proposed regulations on cleaning and personal care products containing 1,4 dioxane; other U.S. states are also considering regulating 1,4 dioxane levels in consumer products. The U.S. Environmental Protection Agency (USEPA) also continues to examine 1,4 dioxane as part of its environmental and occupational regulatory authority. Under TSCA, USEPA identified 1,4 dioxane as a high priority chemical and issued its final risk evaluation and risk determination, concluding that 1,4 dioxane poses an unreasonable risk of injury to human health. US EPAUSEPA will now progress to the risk management phase, in which it is expected to implement risk management measures to mitigate any identified risks. The European Union is also expected to propose a regulatory limit for 1,4 dioxane content in surfactants. We expect our customers to continue reformulating their personal care, cosmetics and cleaning products to comply with New York’s regulations. These trends and corresponding changes in consumer preferences could reduce demand for our ethoxylated surfactant products, as our customers look to reduce the levels of ethoxylated surfactants in their finished products to stay below the maximum allowed levels or transition to alternative surfactants with lower levels of 1,4 dioxane. We have modified our manufacturing process to reduce 1,4 dioxane content to allow customers to continue to use ethoxylated surfactants at current use levels, while also offering consumer product formulations that contain low/no dioxane surfactants.

The Company faces significant competition from numerous global companies as well as national, regional and local companies in the markets it serves. Many of the Company’s competitors have access to greater financial resources, which may enable them to invest significant capital into their businesses, including expenditures for research and development. Some of the Company’s competitors have their own raw material resources and may be able to produce products more economically. In addition, some of the Company’s customers have internal manufacturing capabilities that allow them to achieve make-versus-buy economics, which have resulted and may resultresult, at times in the Company losing business with these customers in volumes that could adversely affect the Company’s profitability. For example, in 2022, the Company lost sales volume from one customer that invested in internal production capabilities for low-1,4 dioxane products.

General economic conditions and macroeconomic trends couldmay adversely affect users of some end products that are manufactured using the Company’s products and the industries in which such end products are used. During economic downturns or other periods of uncertainty, these users may reduce their volume of purchases of such end products or may purchase alternative products, which would reduce demand for the Company’s products. For example, in 2021 and 2022, construction project delays and cancellations related to the impacts of the COVID-19 pandemic and uncertain general economic conditions, including supply chain issues, reduced demand for the Company’s rigid polyol products. In addition, increasingIncreasing concern among consumers, public health professionals and government agencies about environmental, health or wellness issues could lead some of the Company’s customers to limit the use of certain of our products or result in harm to the Company’s reputation. Reduced demand from the primary end markets for the Company’s products, such as the consumer products industry, could adversely affect the Company and demand for our products. Additionally, uncertain conditions in the financial markets pose a risk to the overall economy that may impact consumer demand for such end products and customer demand of some of the Company’s products, as well as the Company’s ability to manage normal commercial relationships with its customers, suppliers and creditors. Some of the Company’s customers may not be able to meet the terms of sale, which would result in increased credit risk and suppliers may not be able to fully perform their contractual obligations due to tighter credit markets or a general slowdown in economic activity.

The Company’s operations are regulated under a number of federal, state, local and foreign environmental, health and safety laws and regulations that govern, among other things, the production and marketing of chemical substances and the discharge, use, handling, transport, storage and disposal of hazardous materials into the air, soil and water. In the United States, these laws and regulations include, but are not limited to, the U.S. Toxic Substances Control Act (TSCA), the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Occupational Safety and Health Act and state and local laws, such as California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65). For example, in March 2025, the Company received a pre-filing notice from USEPA with penalties assigned for violations of the FIFRA associated with certain of the Company’s biocide products sold by a licensed distributor. Analogous laws outside the United States apply to us in many jurisdictions, including, among others, the Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH) regulations in the European Union and the United Kingdom and Biocidal Products Regulations in the European Union and the United Kingdom. Compliance with these environmental, health and safety laws and regulations is a major consideration for the Company, and to comply with some of these laws, we may need to alter our product lines or implement different or more costly manufacturing processes (including the installation of pollution control equipment), which could lead to a material adverse effect on our results of operations. In addition, the transportation of certain raw materials is highly regulated and is subject to increased regulation or restrictions. These regulations may restrict or prohibit transport of these raw materials, resulting in these raw materials not being available to the Company in quantities desired by the Company or at costs attractive to the Company, which may restrict or substantially limit the Company’s manufacturing operations.

In addition, increasingly stringent regulation of human exposure to ethylene oxide by regulatory authorities in the United States could require material expenditures or changes in our manufacturing operations. The Company uses ethylene oxide at its Winder, Georgia andGeorgia, Elwood, Illinois (Millsdale) facilities and expects to use ethylene oxide at its Pasadena, Texas facility.facilities. The Company uses ethylene oxide in a closed loop process to manufacture surfactants that are used in products such as laundry detergents. The Company does not manufacture ethylene oxide, nor does it use ethylene oxide as a fumigant. Ethylene oxide is listed as a hazardous air pollutant under the Clean Air Act, as amended, emissions of which are regulated by the USEPA and other regulatory authorities. In 2020, Georgia adopted a law requiring any spill or release of ethylene oxide that occurs outside of normal operations to be reported to the state within 24 hours. In 2024, the USEPA issued a rule requiring that covered facilities conduct fenceline monitoring for ethylene oxide and install certain control and monitoring devices. Georgia and Illinois legislators have proposed legislation that would impose additional restrictions on the use of ethylene oxide. The USEPA is considering new standards for ethylene oxide emissions. While our production facilities have not yet been materially affected by changes in ethylene oxide regulation, any additional regulatory restrictions on the use or emission of ethylene oxide by facilities could impair our ability to manufacturer certain products in affected locations, including at our Winder, Georgia, Elwood, Illinois (Millsdale) and Pasadena, Texas facilities.

The potential cost to the Company relating to environmental, health and safety and product registration matters is uncertain due to factors such as the complexitycomplexity, evolving and evolvingsometimes conflicting nature of laws and regulations relating to the environment, health and safety and product registration, including those outside of the United States. Environmental, health and safety and product registration laws and regulations may also become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with any violation, as well as restricting or prohibiting the sale of existing or new products, which may also negatively impact the Company’s operating results. Without limiting the foregoing, these laws or regulations may also restrict or prohibit the use of non-renewable or carbon-based substances, or impose fees or penalties for the use of these substances. Accordingly, the Company may become subject to additional liabilities and increased operating costs in the future under these laws and regulations. The impact of any such changes, which are unknown at this time, may have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.

The Company’s results of operations may be adversely affected by international business risks, including changes in global trade policy, fluctuations in currency exchange rates, legal restrictions and taxes.

trade and currency restrictions, including tariffstariffs, related retaliatory countermeasures and currency exchange controls imposedimplemented by the United States and foreign countries;

Historically, the Company has relied on the debt capital markets and bank credit facilities to fund portions of its capital investments and other corporate initiatives, as well as access to bank credit facilitiesinitiatives as part of its overall financing strategy, including working capital management strategy. The Company’s continued access to thesecredit markets, and the terms of such access, depend on multiple factors including theprevailing conditionconditions ofin debt capitalthose markets, as well as the Company’s operating performance, and its credit ratings. These credit ratings can change over time and are based on a number of factors, which include rating agencies’ assessment of the Company’s financial strength and outlook. There can be no assurance that any particular rating assigned to the Company or its debt will remain in effect for any given period of time or that a rating will not be changed or withdrawn by a rating agency, if in that rating agency’s judgment, future circumstances relating to the basis of the rating so warrant. IncurrenceIn addition, incurrence of additional debt by the Company could adversely affect its credit ratings. TheDowngrades of the Company’s credit ratings or adverse changes in the market’s perception of the Company’s creditworthiness could materially and adversely affect the Company’s cost of funds, liquidity, competitive position or access to credit markets. These changes also could increase the cost of or counterparty risks associated with existing facilities, which could materially and adversely affect the Company’s business, financial position, results of operations and cash flows. In this regard, the Company depends on banks and other financial institutions to provide credit to its business and perform under the Company’s agreements with them. Defaults by one or more of these counterparties on their obligations to the Company could materially and adversely affect it. Any downgrade of the Company’s credit ratings could materiallyliquidity and adversely affect its cost of funds, liquidity, competitive position and access to credit markets and increase the cost of and counterparty risks associated with existing facilities, which could materially and adversely affect the Company’s business, financial position, results of operations and cash flows.position.

The defensive measures and training that the Company takes to limit and manage threats, especially cyber-related and social engineering threats, to our business may not adequately anticipate, prevent or mitigate harm we may suffer from such threats. Criminals use evolving and increasingly sophisticated methods of perpetrating illegal and fraudulent activities. For example, as previously disclosed, the Company determined in July 2024 that one of its subsidiaries in Asia was the victim of criminal social engineering scheme that resulted in a series of fraudulently-induced outbound payments for which the Company recognized pre-tax charges of $3.5$6.8 million andin $3.3 million for the quarters ended June 30, 2024, and September 30, 2024, respectively.2024. See Note 24, Other Matter, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details regarding the criminal social engineering scheme. Fraudulent activities committed against the Company could have a material adverse effect on its business, financial position, results of operations and cash flows.

Surfactants - Surfactants, which accounted for 7071 percent of the Company’s consolidated net sales in 2024,2025, 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 Brazil and Mexico) and twoone Asian sitessite (Philippines and Singapore).

Specialty Products – Specialty products, which accounted for threefour percent of consolidated net sales in 2024,2025, 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.

Net income in 20242025 increaseddecreased $10.2$3.5 million, or 25seven percent, to $46.9 million, or $2.05 per diluted share, from $50.4 million, or $2.20 per diluted share,share fromin $40.22024. Adjusted net income was $41.7 million, or $1.75$1.82 per diluted share in 2023.2025 Adjusted net income wasversus $50.5 million, or $2.20 per diluted share in 2024 versus $50.7 million, or $2.21 per diluted share in 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 $186.8$208.0 million in 2024,2025, up 1311 percent, versus $165.8$186.9 million in 2023.2024. Adjusted EBITDA was $198.9 million in 2025, up six percent, versus $187.0 million in 2024, up 4 percent, versus $180.0 million in 2023.2024. (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 20242025 compared to 2023.2024. A detailed discussion of segment operating performance for 2024,2025, compared to 2023,2024, follows the summary.

Consolidated net sales decreasedincreased $145.5$151.8 million, or sixseven percent, between years. LowerHigher average selling prices negativelypositively impacted the year-over-year change in net sales by $160.3$130.7 million. The decreaseincrease in average selling prices was mainly attributable to the pass-through of lowerhigher raw material costs and competitivemore activityfavorable withinproduct certain end markets.mix. Consolidated sales volume increased one percent and positively impacted the year-over-year change in net sales by $17.3$16.5 million. SurfactantConsolidated sales volume, excluding the impact of the Philippines asset divestiture, increased two percent. Polymer and Specialty Products sales volume increased twoeight percent and seven15 percent, respectively. PolymerSurfactant sales volume decreased fourtwo percent. Foreign currency translation negativelyfavorably impacted the year-over-year change in net sales by $2.5$4.6 million, primarily due to a weaker U.S. dollar against the European euro, British pound sterling and Polish zloty, partially offset by a stronger U.S. dollar against the BrazilianMexican realpeso and MexicanBrazilian peso.real.

Operating income in 20242025 increased $11.9$8.1 million, or 2011 percent, versus operating income in 2023.2024. SurfactantPolymer and Specialty Products operating income increased $13.2$2.6 million and $9.4$4.7 million, respectively, year-over-year. PolymerSurfactant operating income decreased $20.1$18.2 million in 20242025 versus 2023.2024. Corporate expenses, including deferred compensation, environmental remediation, businessa restructuring,$6.2 asset/million goodwill/other intangibles impairment chargescharge and $15.9 million of gains recognized on the sale of assets, decreased $19.0 million, or 25 percent, year-over-year. Prior year corporate expenses included a $6.8 million charge associated with aan external criminal social engineering schemefraud impacting one of the Company’s subsidiaries in Asia, decreased $9.4 million, or 11 percent, year-over-year. Most of this decrease was attributable to the non-recurrence of business restructuring and asset/goodwill/other intangibles impairment expenses ($14.0 million) in 2023, partially offset by $6.8 million of expenses associated with a criminal social engineering scheme in 2024.scheme. Foreign currency translation had a $0.8 million negative impact on operating income year-over-year.

Operating expenses (including deferred compensation, businessa restructuringgoodwill impairment charge and asset/goodwill/othergains intangibleson impairmentsthe sale of assets) decreased $17.3$10.4 million, or eightfive percent, year-over-year. Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:

Selling expenses decreasedincreased $2.7$3.1 million, or sixseven percent, between years primarily due to lowerhigher salarysalaries, expensesfringe resulting from workforce productivity measures implemented in late 2023benefits and lower bad debt provision expensesexpense in 20242025 versus 2023.2024.

Research, development and technical service (R&D) expenses decreasedincreased $3.4$3.6 million, or six percent, year-over-year primarily due to lowerhigher salarysalaries expensesand resultingfringe from workforce productivity measures implemented in late 2023.benefits.

Deferred compensation expense decreasedwas $2.2 million,million year-over-year,of primarily due to a smaller increaseexpense in theboth value2025 ofand mutual fund investment assets held for the plans during 2024 versus 2023. Additionally, the market price of the Company’s common stock decreased $29.85 per share in 2024 versus an $11.91 per share decrease during 2023.2024. See the Overview and Segment Results - Corporate Expenses sections of this MD&A for further details.

The Company recorded a $6.2 million goodwill impairment expense, related to its Mexican reporting unit, in 2025. The Company did not recognizeincur any goodwill or other intangible impairment expense in 2024 versus $2.0 million in 2023. In 2023, the Company recognized $1.0 million of goodwill impairment expense related to its Colombia reporting unit and $1.0 million of goodwill and other intangibles impairment expense related to its Lipid Nutrition reporting unit.2024. See Note 4, Goodwill and Other Intangible Assets, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details.

Net interest expense in 20242025 increased $2.1$7.9 million, or 1756 percent, versus the prior year. This increase was primarily attributable to higherlower U.S. capitalized interest ratesincome onrecognized in 2025 as the Company’s revolvingnew creditspecialty alkoxylation facility in 2024Pasadena, versusTexas 2023started along with higher interest expenseup in LatinApril America associated with a one-time tax proceeding reserve.2025.

Other, net was $3.5 million of income in 2025 versus $4.1 million of income in 2024 versus $1.9 million of income in 2023.2024. The Company recognized $4.6$2.8 million of investment gains (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in 20242025 compared to $5.2$4.6 million of investment gains in 2023.2024. In addition, the Company recognized $2.3$0.2 million of lower foreign exchange lossesgains in 20242025 thanversus in 2023 ($1.4 million of foreign exchange losses in 2024 versus $3.7 million of foreign exchange losses in 2023).2024. The Company also recognized $1.0$0.5 million of net periodic pension and other retirement obligations income in 20242025 versus $0.4$1.0 million of income in 2023.2024.

The Company’s effective tax rate was 21.7 percent in 2025 versus 16.7 percent in 20242024. versusThe 16.9increase percentof the 2025 effective tax rate was primarily attributable to a favorable non-recurring deferred tax adjustment in 2023.2024 Thisrelated smallto two of the Company’s Latin America subsidiaries and a decrease wasin comprisedthe amount of variousqualified offsettingtax items.credits year-over-year. These two items were partially offset by the Company settling an audit in one jurisdiction earlier in 2025. See Note 9, Income Taxes, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for a reconciliation of the statutory U.S. federal income tax rate to the effective tax rate.

Surfactant net sales in 20242025 decreasedincreased $70.7$133.9 million, or fournine percent, versus the prior year. LowerHigher average selling prices negativelyfavorably impacted the change in net sales by $97.2$167.2 million. The lowerhigher average selling prices were primarily due to the pass-through of lowerhigher raw material costs and increasedmore competitivefavorable pressureproduct withinmix. certainSales end-usevolume markets.decreased two percent and unfavorably impacted the change in net sales by $27.7 million. Sales volume, excluding the impact of the Philippines asset divestiture, decreased one percent. Foreign currency translation had a $12.9$5.6 million unfavorable impact on the year-over-year change in net sales. Sales volume increased two percent and favorably impacted the change in net sales by $39.4 million. A year-over-year comparison of net sales by region follows:

Net sales for North American operations decreasedincreased $55.1$60.0 million, or sixseven percent, between years. LowerHigher average selling prices had a $40.8$62.4 million unfavorablefavorable impact on the year-over-year change in net sales. The lowerhigher average selling prices were primarily due to the pass-through of lowerhigher raw material costs and lessmore favorable product mix. Sales volume declined less than one percent and negatively impacted the year-over-year change in net sales by $13.8$1.6 million. The lower sales volume primarily reflects lower demand for products sold into agricultural end markets due to customer and channel inventory destocking during the first half of 2024. 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 site, during the first half of 2024. HigherLower demand for products sold into the oilconsumer fieldproducts end markets was largely offset by higher demand for products sold into the agricultural and oilfield end markets and to our distribution partners partially offset the aforementioned decreases.partners. Foreign currency translation negatively impacted the change in net sales by $0.5$0.8 million.

Net sales for European operations decreasedincreased $25.2$43.2 million, or nine16 percent, primarily due to lowerhigher average selling pricesprices, thatwhich negativelyhad impacteda $34.7 million positive impact on the change in net sales by $45.8 million.sales. The lowerhigher average selling prices were primarily due to the pass-through of lowerhigher raw material costs and increasedmore competitivefavorable activityproduct within certain end-use markets.mix. Sales volume increaseddecreased sixone percent and positivelynegatively impacted the change in net sales by $17.8$2.6 million. TheLower higherdemand salesfor volumeproducts sold into the consumer products end markets and to our distribution partners was primarilylargely dueoffset toby higher demand for products sold into the industrial cleaningagricultural and personal careoilfield end markets and to our distribution partners.markets. Foreign currency translation positively impacted the year-over-year change in net sales by $2.8$11.1 million. A weaker U.S. dollar relative to the British pound sterling and European euro led to the favorable foreign currency translation effect.

Net sales for AsianLatin SurfactantAmerican operations decreasedincreased $5.0$37.6 million, or eight12 percent, year-over-year.primarily Lowerdue to higher average selling prices,prices thethat unfavorable impact of foreign currency translation and a one percent decrease in sales volume negativelypositively impacted the year-over-year change in net sales by $3.1$61.5 million, $1.5 million and $0.4 million, respectively.million. The decline inhigher average selling prices reflectsprimarily reflect more favorable product mix and the pass-through of lowerhigher raw material costs. Sales volume decreased three percent and negatively impacted the change in net sales by $8.1 million. The declinedecrease in sales volume was primarily reflectsdue to lower demand for products sold into the commodity laundry and cleaning end markets that was partially offset by higher demand from our distribution partners andfor products sold tointo the industrial cleaning and personal care end markets. A stronger U.S. dollar relative to all currencies within the region led to a $15.8 million unfavorable foreign currency translation effect.

Polymer netNet sales infor 2024Asian operations decreased $57.6$6.9 million, or nine13 percent, versusyear-over-year. An 18 percent decline in sales volume had a $9.8 million unfavorable impact on the prioryear-over-year year.change Lowerin net sales. The lower sales volume was mainly due to the SPQI asset divestiture in the Philippines. Higher average selling prices andhad a four$3.0 percentmillion decreasefavorable inimpact sales volume negatively impactedon the year-over-year change in net sales by $40.0 million and $28.0 million, respectively. Foreignforeign currency translation positivelynegatively impacted the year-over-year change in net sales by $10.4$0.1 million. A year-over-year comparison of net sales by region follows:

PolymerSurfactant operating income for 20242025 decreased $20.1$18.3 million, or 3321 percent, versusbetween operating income for 2023.years. Gross profit decreased $20.9$11.4 million, or 23six percent, and operating expenses wereincreased down $0.7$6.8 million, or threeseven percent, year-over-year.percent. Year-over-year comparisons of gross profit by region and total segment operating expenses and operating income follow:

Gross profit for AsiaNorth and OtherAmerican operations increaseddecreased $2.4$20.0 millionmillion, or 20 percent, versus the prior year primarily due to higherlower average unit margins. The lower average unit margins and an 11 percent increase in sales volume. These items positivelynegatively impacted the year-over-year change in gross profit by $2.0$19.8 million and $0.5were million,primarily respectively.attributable Foreignto currencyhigher translationexpenses hadassociated awith $0.1the millionstart-up negativeof impactthe onCompany’s new alkoxylation facility in Pasadena, Texas, higher oleochemical raw material costs and an environmental reserve adjustment related to the Company’s Elwood, Illinois site. A slight decline in sales volume negatively impacted the year-over-year change in gross profit.profit by $0.2 million.

Operating expenses for the PolymersSurfactant segment decreasedincreased $0.7$6.8 million, or threeseven percent, year-over-yearyear-over-year. primarilyMost dueof this increase was attributable to lowerhigher salarysalaries, expensesfringe benefits and bad debt provision expenses.expense in 2025 versus 2024.

Specialty Products net sales in 20242025 decreasedincreased $17.2$18.4 million, or 2129 percent, versus net sales in 2023.2024. The year-over-year declineincrease in net sales was due to lowerhigher average selling prices that were partially offset byand a seven15 percent increase in sales volume. Gross profit and operating income increased $9.0$5.0 million and $9.4$4.7 million, respectively, year-over-year.respectively. The year-over-year increases in gross profit and operating income were mostly attributable to margin recovery and higher sales volume within the medium chain triglycerides (MCT) product line. The margin recovery was primarily due to the non-recurrence of high-cost raw material inventory carryover experienced during 2023.

For 2024,2025, cash generated from operating activities was a cash source of $162.1$147.9 million versus a source of $174.9$162.1 million in 2023.2024. For 2024,2025, investing cash outflows were $116.9$89.0 million versus cash outflows of $258.7$116.9 million in 2023.2024. Financing activities were a cash use of $35.4 million in 2025 versus a cash use of $64.5 million in 2024 versus a source of $33.3 million in 2023.2024. Cash and cash equivalents decreasedincreased by $30.2$33.0 million compared to December 31, 2023,2024, inclusive of a $10.7$9.6 million unfavorablefavorable foreign exchange rate impact.

As of December 31, 2024,2025, the Company’s cash and cash equivalents totaled $99.7$132.7 million including $12.6$13.8 million in money market funds and $1.2$2.4 million in U.S. demand deposit accounts. Cash and cash equivalents of the Company’s non-U.S. subsidiaries held outside the U.S. totaled $85.9$116.5 million as of December 31, 2024.2025. As of December 31, 2023,2024, the Company’s cash and cash equivalents totaled $99.7 million. Cash in U.S. demand deposit accounts and money market funds totaled $6.4$1.2 million and $15.1$12.6 million, respectively. The Company’s non-U.S. subsidiaries held $108.3$85.9 million of cash outside the United States as of December 31, 2023.2024.

Net income increaseddecreased by $10.2$3.5 million, or 25seven percent, in 20242025 versus the prior year. Working capital was a cash sourceuse of $5.8$15.8 million in 20242025 versus a cash source of $13.4$5.8 million in 2023.2024.

Accounts receivable were a cash source of $23.7 million in 2025 compared to a cash source of $9.0 million in 20242024. comparedInventories towere a cash source of $32.0$0.5 million in 2023.2025 Inventories wereversus a cash use of $37.2 million in 2024 versus a cash source of $144.8 million in 2023.2024. Accounts payable and accrued liabilities were a cash use of $32.7 million in 2025 compared to a cash source of $34.0 million in 2024 compared to a cash use of $158.9 million in 2023.2024.

domestic and global competition and the Company’s ability to successfully compete;

changes in tax policy and potentially adverse tax consequences due to the international scope of the Company’s operations;

downgrades to the Company’s credit ratings or disruptions to the Company’s ability to access well-functioning credit or capital markets;

Surfactants – Surfactants, which accounted for 7573 percent of consolidated net sales for the first threesix months of 2026, 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 one Asian site (Singapore).

In February 2026, the Company announced Project Catalyst, a comprehensive operational and efficiency plan. As part of Project Catalyst, the Board of Directors approved plans to shut down the Company's Fieldsboro, New Jersey site and decommission select assets at its Elwood, Illinois (Millsdale) and Stalybridge, U.K. facilities during the first half of 2026. The Company is mostly consolidating impacted operations into its existing network, improving its asset utilization and reducing its fixed cost basis, while maintaining ongoing supply for its customers. The Company recognized $65.4$5.1 million and $70.5 million of pre-tax business restructuring expense related to these asset shutdowns during the firstsecond quarter and the first six months of 2026.2026, respectively. This restructuring expense is captured on a separate Business Restructuring line item on the Condensed Consolidated Statements of Income for the three and six months ended MarchJune 31,30, 2026. See Note 16, Business Restructuring, of the notes to the Company's consolidated financial statements for more details.

Polymers – Polymers, which accounted for 2224 percent of consolidated net sales for the first threesix months of 2026, 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.

Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first threesix months of 2026, 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.

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 MarchJune 31,30, 2026 and 2025:

Three Months Ended MarchJune 31,30, 2026 and 2025

TheNet Company incurred a $41.1 million net lossincome in the firstsecond quarter of 2026,2026 was $22.9 million, or $1.81$1.00 per diluted share loss,share, versus income of $19.7$11.3 million, or $0.86$0.50 per diluted share, in the firstsecond quarter of 2025. The current year loss resulted from a $51.2 million after-tax restructuring charge recognized in the first quarter of 2026. Adjusted net income was $10.3$27.1 million, or $0.45$1.18 per diluted share, versus $19.3$12.0 million, or $0.84$0.52 per diluted share in the firstsecond quarter of 2025 (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 (loss) and reported earnings (loss) per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share). Earnings before interest, taxes, depreciation and amortization (EBITDA) were a loss of $16.5$69.1 million in the firstsecond quarter of 2026, up 37 percent, versus $58.0$50.6 million of income in the firstsecond quarter of 2025. Adjusted EBITDA was $49.6$74.4 million, downup 1445 percent, versus $57.5$51.4 million in the firstsecond quarter of 2025 (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 firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. A detailed discussion of segment operating performance for the firstsecond quarter of 2026, compared to the firstsecond quarter of 2025, follows the summary.

TheOperating Company incurred a $49.6 million operating lossincome in the firstsecond quarter of 2026 increased $19.2 million, or 107 percent, versus $28.3 million of operating income in the firstsecond quarter of 2025. TheSurfactant firstand quarterPolymer ofoperating 2026income resultsincreased include a $65.4$21.0 million pre-taxand restructuring$5.3 charge.million, Althoughrespectively, the restructuring charges related to the Surfactants segment, all charges associated with the restructuring were excluded from the Surfactant segment results. Rather, the restructuring charges are reflected on a separate Business Restructuring line in the Condensed Consolidated Statements of Income for the first quarter of 2026. Surfactant andyear-over-year. Specialty Products operating income decreased $10.4 million and $0.8 million, respectively, year-over-year. Polymer operating income increased $0.8$0.3 million versus the firstsecond quarter of 2025. Corporate expenses, including business restructuring, environmental remediation and deferred compensation expenses increased $67.5$6.8 million, year-over-year. CorporateBusiness expenses, excluding business restructuring, environmental remediation and deferred compensationrestructuring expenses increasedwere $0.5$5.1 million,million orin fourthe percent,second year-over-year.quarter of 2026 versus no restructuring expenses recognized during the second quarter of 2025. Foreign currency translation had a $1.3$2.1 million positive impact on operating income year-over-year.

Operating expenses,expenses excluding(including thedeferred business restructuring charges noted above,compensation) increased $1.9$3.7 million, or fourseven percent, year-over-year. Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:

Research, development and technical service (R&D) expenses increased $0.3$2.5 million, or two17 percent.percent primarily due to higher incentive-based compensation expenses.

Deferred compensation was $0.6$1.4 million of expense in the firstsecond quarter of 2026 versus $1.0$1.8 million of incomeexpense in the prior year quarter. The $1.6$0.4 million year-over-year increasedecrease in deferred compensation expense primarily reflects a $2.62 per sharesmaller increase in the market pricevalue of themutual Company'sfund commoninvestment stockassets during the firstsecond quarter of 2026 versus a $9.66 per share decrease in the firstsecond quarter of 2025. See the Overview and Segment Results-Corporate Expenses section of this MD&A for further details.

Other, net was $0.1$1.0 million of income in the firstsecond quarter of 2026 versus $0.5$1.3 million of income in the firstsecond quarter of 2025. The Company recognized $0.1$1.4 million of investment lossesgains (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the firstsecond quarter of 2026 compared to $0.4$1.7 million of investment lossesgains in the firstsecond quarter of 2025. In addition, the Company reported $0.2$0.4 million of foreign exchange gainslosses in the firstsecond quarter of 2026 versus $0.6 million of foreign exchange gainslosses in the firstsecond quarter of 2025. The Company's net periodic pension income was less than $0.1 million of income in the firstsecond quarter of 2026 versus $0.3 million of income in the firstsecond quarter of 2025.

Surfactant net sales for the firstsecond quarter of 2026 increased $23.4$72.4 millionmillion, or 18 percent, versus net sales for the firstsecond quarter of 2025. Higher average selling prices favorablyhad impacteda $47.3 million favorable impact on the change in net sales by $9.5 million.sales. The higher average selling prices were mainly attributable to the pass through of higher raw material costs and acosts, more favorable product mix.mix and pricing actions. Sales volume declinedincreased two percent and had a $6.7$9.9 million unfavorablefavorable impact on the change in net sales. Organic net sales increased eight percent year-over-year and organic sales volume increased twoseven percent year-over-year. The Company believes a portion of the volume growth reflects customer pre-buying in response to geopolitical and product supply uncertainty. Foreign currency translation had a $20.6$15.2 million favorable impact on the year-over-year change in net sales. A comparison of net sales by region follows:

Net sales for North American operations increased $7.4$39.4 million, or three17 percent, year-over-year. Higher average selling prices hadpositively a $5.6 million favorable impact onimpacted the change in net sales by $30.9 million and were primarily due to the pass-through of higher raw material costs andcosts, more favorable product mix.mix and pricing actions. Sales volume increased onefour percent and positively impacted the change in net sales by $1.4$8.5 million. The higher sales volume was primarily due to higher demand for products sold into the industrial cleaning, crop productivitycleaning and oilfield end markets that was largely offset by lower demand for products sold into the commodity laundry and cleaning end markets. Foreign currency translation favorably impacted the change in net sales by $0.4 million.

Net sales for European operations increased $12.6$7.4 million, or 1510 percent, primarily due to higher average selling prices, the favorable impact of foreign currency translation, and a fourone percent increase in sales volume and higher average selling prices.volume. These items positively impacted the change in net sales by $8.7$5.2 million, $3.4$1.4 million and $0.5$0.8 million, respectively. The higher average selling prices were primarily due to the pass-through of higher raw material costs and pricing actions. A weaker U.S. dollar relative to the European euro and British pound sterling led to the favorable foreign currency translation effect. The higher sales volume was primarily due to the higher demand for products sold into the cropconsumer productivity and commodity laundry and cleaningproducts end markets, partially offset by lower demand for products sold to our distribution partners. The higher average selling prices were primarily due tointo the pass-throughcrop ofproductivity higherend raw material costs.markets.

Net sales for Latin American operations increased $13.8$33.0 million, or 1736 percent, primarily due to the favorable impact of foreign currency translation andtranslation, a five13 percent increase in sales volume.volume, and higher average selling prices. These items positively impacted the change in net sales by $11.5$13.7 millionmillion, $11.8 million, and $4.1$7.5 million, respectively. A weaker U.S. dollar relative to all currencies within the region led to the favorable foreign currency translation effect. The increase in sales volume was primarily due to higher demand for products sold into the commodity laundry and cleaning, industrial cleaningcleaning, and crop productivity end markets and to our distribution partners. LowerThe higher average selling prices negativelywere impactedprimarily due to the changepass-through inof nethigher salesraw bymaterial $1.8costs, million.more favorable product mix and pricing actions.

Net sales for Asian operations decreased $10.4$7.2 million, or 7361 percent, versus the prior year quarter. AnA 8576 percent decrease in sales volume negatively impacted the year-over-year change in net sales by $12.1$9.1 million. The lower sales volume was mainly due to the divestiture of assets in the Philippines during the fourth quarter of 2025 combined with delays in receiving an export permit after site divestment.2025. Higher average selling prices positively impacted the change in net sales by $1.7$1.8 million. Foreign currency translation had a $0.1 million favorable impact on the change in net sales year-over-year.

Surfactant operating income for the firstsecond quarter of 2026 decreasedincreased $10.4$21.0 million, or 36157 percent, versus operating income for the firstsecond quarter of 2025. Gross profit decreasedincreased $10.0$22.8 million, or 1956 percent, and operating expenses increased $0.4$1.8 million, or twoseven percent. Comparisons of gross profit by region and total segment operating expenses and operating income follow:

Gross profit for North American operations decreasedincreased $2.5$11.0 million, or nine57 percent, versus the prior year primarily due to lowerhigher average unit margins. The lowerhigher average unit margins negativelyfavorably impacted the change in gross profit by $2.6$10.3 million and were primarily attributable to themore severefavorable coldproduct weathermix, impactpricing duringactions, the firstinitial benefits from Project Catalyst actions and the non-recurrence of an environmental remediation reserve adjustment recognized in the second quarter of 20252025. andThe higher oleochemicals raw material costs. A onefour percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.1$0.7 million.

Gross profit for European operations increased $0.7$1.8 million, or seven22 percent, primarily due to higher average unit margins and the favorable impact of foreign currency translation and a four percent increase in sales volume.translation. These items positively impacted the year-over-year change in gross profit by $1.1$1.5 million and $0.4$0.2 million, respectively. LowerThe averageone unitpercent marginsincrease negativelyin sales volume positively impacted the year-over-year change in gross profit by $0.8$0.1 million and primarily reflect less favorable product mix.million.

Gross profit for EuropeanLatin American operations decreasedincreased $4.0$10.1 million, or 4992 percent,percent. versus the first quarter of 2025. This decrease was primarily due to lowerHigher average unit marginsmargins, the favorable impact of foreign currency translation and athe 1913 percent decreaseincrease in sales volume.volume These items negativelyfavorably impacted the year-over-year change in gross profit by $2.8$6.3 million, $2.4 million and $1.5$1.4 million, respectively. ForeignThe currencyhigher translationaverage positivelyunit impactedmargins thelargely changereflect inmore grossfavorable profitproduct by $0.3 million.mix.

Gross profit for Asia and Other operations decreased $0.3$0.2 million,million or 12 percent,year-over-year primarily due to lowerthe averagedouble-digit unitdecrease marginsin andsales avolume threeresulting percentfrom the asset divestiture in the Philippines during the fourth quarter of 2025. The decline in sales volume. These itemsvolume negatively impacted the year-over-year change in gross profit by $0.3$1.8 million andbut $0.1was million,largely respectively.offset Foreignby currencyhigher translationaverage unit margins. The higher average unit margins positively impacted the change in gross profit by $0.1$1.6 million.million and largely reflect lower overhead expenses resulting from production timing differences.

Specialty ProductsPolymer net sales for the firstsecond quarter of 2026 increased $4.0$15.3 million, or 24nine percent, versus net sales for the firstsame quarterperiod of 2025. TheA five percent increase wasin primarilysales due tovolume, higher salesaverage volume.selling Gross profitprices and operatingthe incomefavorable decreasedimpact $0.8of foreign currency translation positively impacted the year-over-year change in net sales by $7.4 million, $6.0 million each year-over-year. The year-over-year decreases in gross profit and operating$1.9 incomemillion, wererespectively. primarilyA duecomparison toof productnet mixsales andby lowerregion margins within the medium chain triglycerides (MCT) product line due to higher raw material costs.follows: