STEPAN CO Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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The following is management's discussion and analysis (MD&A) of certain
significant factors that have affected the Company's financial condition and
results of operations during the interim periods included in the accompanying
condensed consolidated financial statements.

Certain statements in this Quarterly Report on Form 10-Q, other than purely
historical information, are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act). These statements include statements
about Stepan Company's and its subsidiaries' (the Company) plans, objectives,
strategies, financial performance and outlook, trends, the amount and timing of
future cash distributions, prospects or future events and involve known and
unknown risks that are difficult to predict. As a result, the Company's actual
financial results, performance, achievements or prospects may differ materially
from those expressed or implied by these forward-looking statements. In some
cases, forward-looking statements can be identified by the use of words such as
"may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe,"
"estimate," "guidance," "predict," "potential," "continue," "likely," "will,"
"would," "should," "illustrative" and variations of these terms and similar
expressions, or the negative of these terms or similar expressions. Such
forward-looking statements are necessarily based upon estimates and assumptions
that, while considered reasonable by the Company and its management based on
their knowledge and understanding of the business and industry, are inherently
uncertain. These statements are not guarantees of future performance, and
stockholders should not place undue reliance on forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of
which are beyond the Company's control, that could cause the Company's actual
results to differ materially from the forward-looking statements contained in
this Quarterly Report on Form 10-Q.

Such risks, uncertainties and other important factors, include, among others,
the risks, uncertainties and factors set forth under "Part II-Item IA - Risk
Factors" of this Quarterly Report on Form 10-Q and under "Part I-Item IA. Risk
Factors" in the Company's Annual Report on Form 10-K for the year ended December
31, 2021, including the risks and uncertainties related to the following:

the impact of the COVID-19 pandemic;

accidents, unplanned production stoppages or disruptions at any of the Company’s manufacturing facilities;

reduced demand for the Company’s products due to customer product reformulations or new technologies;

the Company’s inability to successfully develop or introduce new products;

compliance with environmental, health and safety laws, product registration and anti-corruption;

the Company’s ability to make acquisitions of suitable candidates and to successfully integrate acquisitions;

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

volatility in the cost of raw materials, natural gas and electricity and any disruption in their supply;

transportation disruptions or significant changes in transportation costs;

downturns in certain industries and general economic downturns;

international business risks, including exchange rate fluctuations, legal restrictions and taxes;

unfavorable resolution of disputes against the Company;

the Company’s ability to maintain and protect its intellectual property rights;

potentially adverse tax consequences due to the international scope of the Company’s business;

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

conflicts, military actions, terrorist attacks and general instability, particularly in certain energy-producing countries, as well as increased security regulations;

cost overruns, delays and miscalculations in capacity requirements with respect to the Company’s expansion or other capital projects;

interruption, damage or compromise of Company computer systems and failure to maintain the integrity of customer, co-worker or Company data;

the Company’s ability to retain its senior management and other key personnel;

the Company’s ability to operate within the covenants; and

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the other factors set out under “Risk Factors”.

These factors are not necessarily all of the important factors that could cause
the Company's actual financial results, performance, achievements or prospects
to differ materially from those expressed in or implied by any of its
forward-looking statements. Other unknown or unpredictable factors could also
impact the Company's results. All forward-looking statements attributable to the
Company or persons acting on the Company's behalf are expressly qualified in
their entirety by the cautionary statements set forth above. Forward-looking
statements speak only as of the date they are made, and the Company does not
undertake or assume any obligation to update publicly any of these
forward-looking statements to reflect actual results, new information or future
events, changes in assumptions or changes in other factors affecting
forward-looking statements, except to the extent required by applicable laws. If
the Company updates one or more forward-looking statements, no inference should
be drawn that the Company will make additional updates with respect to those or
other forward-looking statements.

The “Company”, “we”, “us” or “our” means Stepan Company and one or more of its subsidiaries only.

Overview

The Company produces and sells intermediate chemicals that are used in a wide
variety of applications worldwide. The overall business is comprised of three
reportable segments:

Surfactants - Surfactants, which accounted for 66 percent of consolidated net
sales for the first nine months of 2022, 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). Recent significant events include:

o
In February 2021, the Company acquired a fermentation plant located in Lake
Providence, Louisiana. The Company believes this plant complements the
rhamnolipid-based bio-surfactant technology the Company acquired from Logos
Technologies in March 2020. Fermentation is a new platform technology for the
Company and the Company is focusing efforts to further develop, integrate,
produce and commercialize these unique surfactants moving forward.
Bio-surfactants, produced via fermentation, are attractive due to their
biodegradability, low toxicity, and in some cases, unique antimicrobial
properties. These bio-surfactants offer synergies in several strategic end use
markets including oilfield, agriculture, personal care and household, industrial
and institutional cleaning. The acquisition of this industrial scale
fermentation plant represents the latest step in the Company's bio-surfactant
commercialization efforts. See Note 17, Acquisitions, of the notes to the
Company's condensed consolidated financial statements (included in Item 1 of
this Form 10-Q) for additional details.

o
On September 23, 2022, the Company purchased PerformanX Specialty Chemicals,
LLC's surfactant business and associated assets. Included in the transaction
were intellectual property, customer relationships, inventory and working
capital. This acquisition enhanced the Company's specialty alkoxylates portfolio
and provides market diversification opportunities. This acquisition is also
expected to deliver additional baseload volumes for the Company's Pasadena,
Texas alkoxylation investment that is scheduled to start up in early 2024. See
Note 17, Acquisitions, of the notes to the Company's condensed consolidated
financial statements (included in Item 1 of this Form 10-Q) for additional
details.

Polymers - Polymers, which accounted for 30 percent of consolidated net sales
for the first nine months of 2022, 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 (see the INVISTA
acquisition discussion below). 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 (see the INVISTA acquisition
discussion below) 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. Recent significant events include:

o
In January 2021, the Company purchased INVISTA's aromatic polyester polyol
business and associated assets. Included in the transaction were two
manufacturing sites, one in Wilmington, North Carolina and the other in
Vlissingen, Netherlands, along with intellectual property, customer
relationships, inventory and working capital. This acquisition expanded the
Company's manufacturing capabilities in both the United States and Europe and
enhanced the Company's business continuity capabilities for the market. The
Company believes that the facilities' available spare capacity, combined with
debottlenecking

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opportunities in both plants, will allow Stepan to support future market growth
in a capital efficient way. See Note 17, Acquisitions, of the notes to the
Company's condensed consolidated financial statements (included in Item 1 of
this Form 10-Q) for additional details.

Specialty Products - Specialty products, which accounted for four percent of
consolidated net sales for the first nine months of 2022, 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.

Deferred Compensation Plans

The accounting for the Company's deferred compensation plans can cause
period-to-period fluctuations in Company income and expenses. Compensation
expense is recognized when the value of Company common stock and mutual fund
investment assets held for the plans increase, and compensation income is
recognized when the value of Company common stock and mutual fund investment
assets decline. The pretax effect of all deferred compensation-related
activities (including realized and unrealized gains and losses on the mutual
fund assets held to fund the deferred compensation obligations) and the income
statement line items in which the effects of the activities were recorded are
displayed in the following table:


                                                     Income (Expense)
                                                   For the Three Months
                                                    Ended September 30,
(In millions)                                      2022              2021           Change
Deferred Compensation (Administrative
expenses)                                      $        2.1       $      1.5     $        0.6   (1)
Realized/Unrealized Losses on Investments
(Other, net)                                           (1.0 )           (0.2 )           (0.8 )
Investment Income (Other, net)                          0.1              0.2             (0.1 )
Pretax Income Effect                           $        1.2       $      1.5     $       (0.3 )



                                                      Income (Expense)
                                                    For the Nine Months
                                                    Ended September 30,
(In millions)                                       2022             2021          Change
Deferred Compensation (Administrative
expense)                                        $       13.0      $     (2.2 )   $     15.2   (1)
Realized/Unrealized Gains (Losses) on
Investments (Other, net)                                (7.8 )           2.4          (10.2 )
Investment Income (Other, net)                           0.5             0.7           (0.2 )
Pretax Income Effect                            $        5.7      $      0.9     $      4.8


(1)

Refer to the Segment Results – Business Expenses sections of this MD&A for further details regarding period-to-period changes in deferred compensation.

Effects of Foreign Currency Conversion

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 nine months ended
September 30, 2022 and 2021:

                     For the Three Months
                      Ended September 30,
                                                                   (Decrease)
                                                                 Due to Foreign
(In millions)         2022            2021        Increase        Translation
Net Sales          $     719.2       $ 602.7     $    116.5     $          (35.7 )
Gross Profit             118.5          91.9           26.6                 (4.5 )
Operating Income          54.7          40.2           14.5                 (3.1 )
Pretax Income             50.5          39.3           11.2                 (3.1 )




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                     For the Nine Months
                     Ended September 30,
                                                                  (Decrease)
                                                                Due to Foreign
(In millions)         2022          2021         Increase        Translation
Net Sales          $  2,146.1     $ 1,735.9     $    410.2     $          (72.9 )
Gross Profit            359.3         312.6           46.7                 (9.7 )
Operating Income        195.6         150.8           44.8                 (6.7 )
Pretax Income           179.4         150.3           29.1                 (6.8 )


RESULTS OF OPERATIONS

Three months completed September 30, 2022 and 2021

Summary

Net income attributable to the Company in the third quarter of 2022 increased
seven percent to $39.4 million, or $1.71 per diluted share, from $36.9 million,
or $1.59 per diluted share, in the third quarter of 2021. Adjusted net income
increased 27 percent to $46.3 million, or $2.01 per diluted share, from $36.4
million, or $1.57 per diluted share in the third quarter of 2021 (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
attributable to the Company and reported earnings per diluted share and non-GAAP
adjusted net income and adjusted earnings per diluted share). Below is a summary
discussion of the major factors leading to the changes in net sales, expenses
and income in the third quarter of 2022 compared to the third quarter of 2021. A
detailed discussion of segment operating performance for the third quarter of
2022 compared to the third quarter of 2021 follows the summary.

Consolidated net sales increased $116.5 million, or 19 percent, from the prior
year quarter. Higher average selling prices favorably impacted the
year-over-year change in net sales by $201.6 million. The increase in average
selling prices was mainly attributable to the pass-through of higher raw
material and logistics costs as well as more favorable product and customer mix.
Consolidated sales volume declined eight percent, which negatively impacted the
change in net sales by $49.4 million. Sales volume in the Surfactant and Polymer
segments decreased eight and 10 percent, respectively, while sales volume in the
Specialty Products segment increased 10 percent. Foreign currency translation
negatively impacted the year-over-year change in net sales by $35.7 million due
to a stronger U.S. dollar against most currencies in foreign locations where the
Company has operations.

Operating income in the third quarter of 2022 increased $14.4 million, or 36
percent, versus operating income in the third quarter of 2021. Polymer,
Specialty Products and Surfactant operating income increased $12.1 million, $7.2
million, and $4.5 million, respectively, versus the third quarter of 2021.
Corporate expenses, including business restructuring and deferred compensation
expenses, increased $9.4 million year-over-year. Most of this increase was
attributable to $9.9 million of higher environmental remediation reserve
expenses in the current year quarter. This environmental reserve increase
primarily reflects revised remediation cost estimates for the Company's Maywood,
New Jersey site due to U.S. Environmental Protection Agency (USEPA) work plan
approvals and the receipt of third-party contractor bids during the third
quarter of 2022. Higher deferred compensation income ($0.6 million) and lower
consulting expenses, partially offset by higher incentive-based compensation
expenses, positively impacted the year-over-year change in corporate expenses.
Foreign currency translation had a $3.1 million negative impact on operating
income in the third quarter of 2022 versus the prior year quarter.

Operating expenses (including deferred compensation and business restructuring)
increased $12.1 million, or 23 percent, versus the prior year quarter. Changes
in the individual income statement line items that comprise the Company's
operating expenses were as follows:

Selling fees have increased $0.3 millionor two percent, between years.

Administrative expenses increased $11.0 million, or 48 percent, primarily due to
the higher environmental remediation reserve ($9.9 million) and incentive-based
compensation expenses, partially offset by lower consulting expenses.

Increase in research, development and technical services (R&D) expenditure $1.4 millionor 9%, primarily due to higher incentive compensation expense.

Deferred compensation was $2.1 million of income in the third quarter of 2022
versus $1.5 million of income in the prior year quarter. The $0.6 million
increase in deferred compensation income was primarily due to a decrease in the
value of mutual fund investment assets held for the plans. Also contributing to
this increase was a $7.68 per share decrease in the market price of Company
common stock in the third quarter of 2022 compared to a $7.33 per share decrease
in the third quarter of 2021. See the Overview and Segment Results-Corporate
Expenses section of this MD&A for further details.

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Corporate restructuring expenses were $0.1 million both in the third quarter of 2022 and in 2021. Restructuring costs in both years relate to ongoing decommissioning costs associated with the closure of the Company’s Canadian plant.

Third quarter 2022 net interest expense increased $0.6 millionor 39%, compared to the third quarter of 2021. This increase is mainly attributable to higher outstanding debt balances in 2022 compared to 2021.

Other, net was $2.0 million of expense in the third quarter of 2022 versus $0.7
million of income in the third quarter of 2021. The Company recognized $1.0
million of investment losses (including realized and unrealized gains and
losses) for the Company's deferred compensation and supplemental defined
contribution mutual fund assets in the third quarter of 2022 compared to less
than $0.1 million of investment losses in the third quarter of 2021. In
addition, the Company reported $1.4 million of foreign exchange losses in the
third quarter of 2022 versus $0.4 million of foreign exchange gains in the third
quarter of 2021. The Company's net periodic pension income was flat between
years.

The Company's effective tax rate was 21.9 percent in the third quarter of 2022
compared to 6.1 percent in the third quarter of 2021. The increase was primarily
attributable to: (a) a non-recurring favorable tax benefit recognized in the
third quarter of 2021 related to the merger of the Company's three Brazilian
entities into a single entity; and (b) a small increase in state taxes due to an
increase in global intangible low-taxed income (GILTI) and lower excess tax
benefits related to stock-based compensation.

Segment Results

                                             For the Three Months Ended
(Dollars in thousands)                              September 30,
                                                                                               Percent
Net Sales                                     2022                2021         Increase        Change
Surfactants                                $   474,861         $   387,734     $  87,127              22
Polymers                                       214,807             198,841        15,966               8
Specialty Products                              29,517              16,113        13,404              83
Total Net Sales                            $   719,185         $   602,688     $ 116,497              19




                                             For the Three Months Ended
(Dollars in thousands)                              September 30,
                                                                                 Increase        Percent
Operating Income                              2022                2021          (Decrease)        Change
Surfactants                                $    38,976         $    34,452     $      4,524             13
Polymers                                        31,864              19,753           12,111             61
Specialty Products                               9,685               2,442            7,243            297
 Segment Operating Income                  $    80,525         $    56,647     $     23,878             42
Corporate Expenses, Excluding Deferred
Compensation
 and Restructuring                         $    27,905         $    17,866     $     10,039             56
Deferred Compensation Expense (Income)          (2,131 )            (1,504 )           (627 )           42
Business Restructuring                              92                  72               20             28
Total Operating Income                     $    54,659         $    40,213     $     14,446             36


Surfactants

Surfactant net sales for the third quarter of 2022 increased $87.1 million, or
22 percent, versus net sales for the third quarter of 2021. Higher average
selling prices positively impacted the change in net sales by $136.2 million.
The higher average selling prices were mainly attributable to the pass-through
of higher raw material and logistics costs as well as improved product and
customer mix. Foreign currency translation had a $19.3 million unfavorable
impact on the year-over-year change in net sales. Sales volume declined eight
percent and negatively impacted the change in net sales by $29.8 million. A
comparison of net sales by region follows:

                                             For the Three Months Ended
(Dollars in thousands)                             September 30,
                                                                                                Percent
Net Sales                                     2022                2021          Increase        Change
North America                             $    272,557         $   217,481     $   55,076              25
Europe                                          86,344              73,199         13,145              18
Latin America                                   98,313              81,164         17,149              21
Asia                                            17,647              15,890          1,757              11
Total Surfactants Segment                 $    474,861         $   387,734     $   87,127              22




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Net sales for North American operations increased $55.1 million, or 25 percent,
year-over-year. Higher average selling prices positively impacted the change in
net sales by $68.7 million. The higher average selling prices were mainly
attributable to the pass-through of higher raw material and logistics costs
along with more favorable product and customer mix. Sales volume declined six
percent between years and negatively impacted the change in net sales by $13.2
million. Lower sales volume into the consumer product end markets, principally
commodity laundry products, accounted for most of the decline. The decline in
commodity laundry products was primarily due to continued raw material
availability issues and previously anticipated lost volume at one customer that
chose to invest in internal production capabilities as part of the transition to
low 1,4 dioxane products. Higher customer demand for products sold into the
agricultural and oilfield end markets partially offset the above. Foreign
currency translation negatively impacted the change in net sales by $0.4
million.

Net sales for European operations increased $13.1 million, or 18 percent, versus
the prior year quarter. Higher average selling prices positively impacted the
year-over-year change in net sales by $32.4 million. The higher average selling
prices were primarily due to the pass-through of higher raw material costs and
improved product and customer mix. Sales volume declined six percent and
negatively impacted the change in net sales by $4.5 million. Lower sales volume
into the laundry and cleaning end markets, mostly commodity laundry products,
was partially offset by higher demand for products sold into the functional
products and institutional cleaning end markets. Foreign currency translation
negatively impacted the change in net sales by $14.8 million. A stronger U.S.
dollar relative to the European euro and British pound sterling led to the
unfavorable foreign currency translation effect.

Net sales for Latin American operations increased $17.1 million, or 21 percent,
primarily due to higher average selling prices which positively impacted the
change in net sales by $28.2 million. The higher average selling prices were
primarily due to the pass-through of higher raw material costs and improved
product and customer mix. Sales volume declined 11 percent and negatively
impacted the change in net sales by $8.9 million. The sales volume decline was
primarily due to lower demand for commodity laundry products sold within the
consumer products business partially offset by higher demand for products sold
into the functional products end markets. A stronger U.S. dollar relative to all
currencies within the region led to a $2.2 million unfavorable foreign currency
translation effect.

Net sales for Asian operations increased $1.8 million, or 11 percent, versus the
prior year quarter. Higher average selling prices positively impacted the change
in net sales by $5.7 million. The higher average selling prices primarily
reflect the pass-through of higher raw material costs. A 13 percent decline in
sales volume and the unfavorable impact of foreign currency translation
negatively impacted the change in net sales by $2.0 million and $1.9 million,
respectively. The decline in sales volume primarily reflects lower demand for
commodity laundry products sold within the consumer products business, partially
attributable to lost market share with one major customer, and lower demand from
our distribution partners.

Surfactant operating income for the third quarter of 2022 increased $4.5
million, or 13 percent, versus operating income for the third quarter of 2021.
Gross profit increased $6.7 million, or 11 percent, and operating expenses
increased $2.2 million, or eight percent. Comparisons of gross profit by region
and total segment operating expenses and operating income follow:

                                             For the Three Months Ended
(Dollars in thousands)                              September 30,
                                                                                 Increase        Percent
Gross Profit and Operating Income             2022                2021          (Decrease)        Change
North America                              $    42,078         $    36,112     $      5,966             17
Europe                                           9,756               9,468              288              3
Latin America                                   14,013              12,074            1,939             16
Asia                                             1,916               3,369           (1,453 )          -43
Surfactants Segment Gross Profit           $    67,763         $    61,023     $      6,740             11
Operating Expenses                              28,787              26,571            2,216              8

Surfactants segment operating profit $38,976 $34,452

    $      4,524             13



Gross profit for North American operations increased $6.0 million, or 17
percent, versus the prior year primarily due to higher average unit margins. The
higher average unit margins positively impacted the change in gross profit by
$8.2 million and were mostly attributable to more favorable product and customer
mix. A six percent decline in sales volume negatively impacted the
year-over-year change in gross profit by $2.2 million. Gross profit was
negatively impacted by ongoing supply chain challenges, inclusive of raw
material constraints and inflationary pressures.

Gross profit for European operations increased $0.3 million, or three percent,
primarily due to higher average unit margins. The higher average unit margins
positively impacted the change in gross profit by $2.5 million and were mostly
attributable to more favorable product and customer mix. The unfavorable impact
of foreign currency translation and a six percent decline in sales volume
negatively impacted the change in gross profit by $1.6 million and $0.6 million,
respectively.

Gross profit from Latin America operations increased $1.9 million, or 16%, mainly due to improved average unit margins. The increase in average unit margins had a positive impact on the evolution of the gross margin of $3.5 million and mainly reflect the improvement of the product and

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customer mix. An 11 percent decline in sales volume and the unfavorable impact
of foreign currency translation negatively impacted the year-over-year change in
gross profit by $1.3 million and $0.3 million, respectively.

Gross profit for Asia operations decreased $1.5 million, or 43 percent, from the
prior year quarter primarily due to lower average unit margins. The lower
average unit margins negatively impacted the change in gross profit by $1.1
million. A 13 percent decline in sales volume negatively impacted the change in
gross profit by $0.4 million.

Operating expenses for the Surfactant segment increased $2.2 million, or eight
percent, in the third quarter of 2022 versus the third quarter of 2021. This
increase was mainly attributable to higher incentive-based compensation expenses
in the third quarter of 2022.

Polymers

Polymer net sales for the third quarter of 2022 increased $16.0 million, or
eight percent, versus net sales for the same period of 2021. Higher average
selling prices positively impacted the change in net sales by $51.4 million. The
higher average selling prices were mainly due to the pass through of higher raw
material costs and margin recovery. A 10 percent decline in sales volume and the
unfavorable impact of foreign currency translation negatively impacted the
change in net sales by $19.8 million and $15.6 million, respectively. A
comparison of net sales by region follows:

                                             For the Three Months Ended
(Dollars in thousands)                              September 30,
                                                                                 Increase        Percent
Net Sales                                     2022                2021          (Decrease)        Change
North America                              $   128,992         $   104,055     $     24,937             24
Europe                                          76,022              82,872           (6,850 )           -8
Asia and Other                                   9,793              11,914           (2,121 )          -18
Total Polymers Segment                     $   214,807         $   198,841     $     15,966              8



Net sales for North American operations increased $24.9 million, or 24 percent,
primarily due to higher average selling prices. Higher average selling prices
positively impacted the change in net sales by $29.1 million. The higher average
selling prices were mainly due to the pass-through of higher raw material costs
and margin recovery. Sales volume declined four percent between years and had a
$4.2 million unfavorable impact on the change in net sales. The decline in sales
volume reflects lower demand within the phthalic anhydride and specialty polyols
businesses.

Net sales for European operations decreased $6.9 million, or eight percent,
year-over-year. The unfavorable impact of foreign currency translation and a 16
percent decrease in sales volume negatively impacted the change in net sales by
$15.0 million and $13.6 million, respectively. A stronger U.S. dollar relative
to the Polish zloty and British pound sterling led to the unfavorable foreign
currency translation effect. The decline in sales volume reflects weakening
construction demand due to the energy crisis in Europe and customer share loss.
Higher average selling prices positively impacted the change in net sales by
$21.7 million. The higher average selling prices were primarily due to
pass-through of higher raw material costs.

Net sales for Asia and Other operations decreased $2.1 million, or 18 percent,
primarily due to a 16 percent decline in sales volume and the unfavorable impact
of foreign currency translation. These items negatively impacted the
year-over-year change in net sales by $1.9 million and $0.5 million,
respectively. The decline in sales volume was primarily attributable to
suppressed demand resulting from recent COVID lockdowns and restrictions in
China. Higher average selling prices positively impacted the change in net sales
by $0.3 million.

Polymer operating income in the third quarter of 2022 increased $12.1 million,
or 61 percent, versus operating income in the third quarter of 2021. Gross
profit increased $12.2 million, or 44 percent and operating expenses were flat
between years. Comparisons of gross profit by region and total segment operating
expenses and operating income follow:

                                             For the Three Months Ended
(Dollars in thousands)                              September 30,
                                                                                 Increase        Percent
Gross Profit and Operating Income             2022                2021          (Decrease)        Change
North America                              $    27,407         $    14,021     $     13,386             95
Europe                                          11,799              12,511             (712 )           -6
Asia and Other                                     693               1,212             (519 )          -43
Polymers Segment Gross Profit              $    39,899         $    27,744     $     12,155             44
Operating Expenses                               8,035               7,991               44              1

Polymers segment operating result $31,864 $19,753

   $     12,111             61




                                       28
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Gross profit for North American operations increased $13.4 million primarily due
to higher average unit margins. The higher unit margins positively impacted the
year-over-year change in gross profit by $14.0 million. The higher unit margins
reflect margin recovery and more favorable product and customer mix. Sales
volume declined four percent and negatively impacted the change in gross profit
by $0.6 million.

Gross profit for European operations decreased $0.7 million, or six percent,
versus the third quarter of 2021. The decrease was primarily due to the
unfavorable impact of foreign currency translation and a 16 percent decrease in
sales volume. These two items negatively impacted the year-over-year change in
gross profit by $2.2 million and $2.1 million respectively. Higher average unit
margins positively impacted the change in gross profit by $3.6 million.

Gross profit for Asia and Other activities decreased $0.5 million, or 43%, due to lower average unit margins and a 16% decline in sales volume. These items had a negative impact on the change in the gross margin of $0.3 million and $0.2 millionrespectively.

Operating expenses for the Polymers segment remained stable year-on-year.

Specialty Products

Specialty Products net sales for the third quarter of 2022 increased $13.4
million, or 83 percent, versus net sales for the third quarter of 2021. This
increase reflects higher average selling prices and a 10 percent increase in
sales volume. Gross profit and operating income increased $7.0 million and $7.2
million, respectively, year-over-year. The year-over-year improvements in gross
profit and operating income were mostly attributable to improved margins and
customer mix within the medium chain triglycerides (MCTs) product line.

Corporate expenses

Corporate expenses, which include deferred compensation, business restructuring
and other operating expenses that are not allocated to the reportable segments,
increased $9.4 million between quarters. Corporate expenses were $25.9 million
in the third quarter of 2022 versus $16.4 million in the third quarter of 2021.
This year-over-year increase was primarily attributable to $9.9 million of
higher environmental reserve expenses, mostly related to revised remediation
cost estimates associated with the Company's Maywood, New Jersey site. The
Company anticipates that the majority of Maywood soil remediation would be
completed over the next two to three years.

The $0.6 million increase in deferred compensation income was primarily driven
by a decrease in the value of mutual fund investment assets held for the plans.
Also contributing to this increase was a $7.68 per share decrease in the market
price of Company common stock in the third quarter of 2022 compared to a $7.33
per share decrease in the third quarter of 2021. 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 September 30,
2022 and 2021:

                                        2022                           2021
                             September 30      June 30       September 30      June 30
Company Common Stock Price   $       93.67     $ 101.35     $       112.94  

$120.27

Nine month period ended September 30, 2022 and 2021

Summary

Net income attributable to the Company in the first nine months of 2022
increased 13 percent to $136.3 million, or $5.90 per diluted share, from $120.8
million, or $5.19 per diluted share, in the first nine months of 2021. Adjusted
net income increased 16 percent to $140.0 million, or $6.06 per diluted share,
versus $121.0 million or $5.20 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
attributable to the Company and reported earnings per diluted share and non-GAAP
adjusted net income and adjusted earnings per diluted share). 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 nine months of 2022 compared to the
first nine months of 2021. A detailed discussion of segment operating
performance for the first nine months of 2022 compared to the first nine months
of 2021 follows the summary.

Consolidated net sales increased $410.2 million, or 24 percent, year-over-year.
Higher average selling prices positively impacted the change in net sales by
$540.8 million. The increase in average selling prices was mainly attributable
to the pass through of higher raw material and logistics costs as well as more
favorable product and customer mix. Consolidated sales volume declined three
percent and negatively impacted the year-over-year change in net sales by $57.7
million. Sales volume in the Surfactant, Polymer and Specialty Products segments
decreased four percent, two percent and three percent, respectively. Foreign
currency translation negatively impacted the year-over-year change in net sales
by $72.9 million due to a stronger U.S. dollar against the majority of
currencies in foreign locations where the Company has operations.

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Operating income for the first nine months of 2022 increased $44.9 million, or
30 percent, versus operating income for the first nine months of 2021. Polymer,
Specialty Products and Surfactant operating income increased $19.2 million,
$11.2 million, and $7.4 million, respectively. Corporate expenses, including
business restructuring and deferred compensation expenses, decreased $7.1
million year-over-year. Most of this decrease was attributable to a $15.2
million decrease in deferred compensation expenses and lower acquisition-related
expenses that were partially offset by $10.2 million of higher environmental
remediation reserve expenses and higher incentive-based compensation expenses.
Foreign currency translation had a $6.7 million negative impact on operating
income in the first nine months of 2022 versus the first nine months of 2021.

Operating expenses (including deferred compensation, business restructuring and goodwill impairment) increased $1.9 million, or one percent, between years. The change in the individual income statement items that make up the Company’s operating expenses is as follows:

Selling expenses increased $1.6 million, or four percent, year-over-year mainly
due to higher incentive-based compensation expenses, travel-related expenses and
higher bad debt provision expenses related to higher global accounts receivable
balances and the ongoing conflict in Ukraine.

Administrative expenses increased $10.1 million, or 14 percent, year-over-year
primarily due to higher environmental remediation reserve expenses ($10.2
million) and higher incentive-based compensation expenses, partially offset by
lower acquisition-related and consulting expenses.

R&D spending increased $4.5 millionor 10%, year over year, primarily due to higher salaries and incentive compensation expenses.

Deferred compensation expense decreased $15.2 million, year-over-year, primarily
due to a decrease in the value of the mutual fund investment assets held for the
plans and a $30.60 per share decrease in the market price of Company common
stock in the first nine months of 2022 compared to a $6.38 per share decrease in
the first nine months of 2021. See the Overview and Segment Results-Corporate
Expenses section of this MD&A for further details.

Corporate restructuring expenses were flat year over year. Restructuring charges for both years relate to ongoing decommissioning costs associated with the closure of the Company’s Canadian plant.

Good will impairment charges have been $1.0 million in the first nine months of 2022 compared to not recognizing an impairment charge the prior year. See Note 18, Impairment of Goodwill, in the Notes to the Company’s Condensed Consolidated Financial Statements (included in Item 1 of this Form 10-Q) for further details.

Net interest expense for the first nine months of 2022 increased $2.6 million,
or 55 percent, compared to net interest expense for the first nine months of
2021. This increase was primarily attributable to higher outstanding debt
balances in the first nine months of 2022 versus the first nine months of 2021.

Other, net was $9.0 million of expense for the first nine months of 2022
compared to $4.2 million of income for the first nine months of 2021. The
Company recognized $7.6 million of investment losses (including realized and
unrealized gains and losses) for the Company's deferred compensation and
supplemental defined contribution mutual fund assets in the first nine months of
2022 compared to $3.2 million of income in the first nine months of 2021. In
addition, the Company reported foreign exchange losses of $2.6 million in the
first nine months of 2022 versus $0.1 million of foreign exchange gains in the
first nine months of 2021. The Company also reported $0.3 million of higher net
periodic pension income in the first nine months of 2022 versus the first nine
months of the prior year.

The Company's effective tax rate was 24.0 percent in the first nine months of
2022 versus 19.6 percent in the first nine months of 2021. The year-over-year
increase was primarily attributable to: (a) a non-recurring favorable tax
benefit recognized in the third quarter of 2021 related to the merger of the
Company's three Brazilian entities into a single entity; and (b) a small
increase in state taxes due to an increase in GILTI and lower excess tax
benefits related to stock-based compensation.


                                              For the Nine Months Ended
(In thousands)                                      September 30,
                                                                                               Percent
Net Sales                                      2022               2021         Increase        Change
Surfactants                                $  1,428,211       $  1,142,672     $ 285,539              25
Polymers                                        640,771            539,764       101,007              19
Specialty Products                               77,112             53,503        23,609              44
Total Net Sales                            $  2,146,094       $  1,735,939     $ 410,155              24




                                       30
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                                              For the Nine Months Ended
(In thousands)                                      September 30,
                                                                                 Increase         Percent
Operating Income                              2022                2021          (Decrease)        Change
Surfactants                                $   140,994         $   133,558     $      7,436               6
Polymers                                        79,905              60,729           19,176              32
Specialty Products                              23,246              12,052           11,194              93
 Segment Operating Income                  $   244,145         $   206,339     $     37,806              18
Corporate Expenses, Excluding Deferred
Compensation
 and Restructuring                         $    61,313         $    53,140     $      8,173              15
Deferred Compensation Expense (Income)         (13,038 )             2,148          (15,186 )            NM
Business Restructuring                             225                 267              (42 )
Total Operating Income                     $   195,645         $   150,784     $     44,861              30


Segment Results

Surfactants

Surfactant net sales for the first nine months of 2022 increased $285.5 million,
or 25 percent, versus net sales for the first nine months of 2021. Higher
average selling prices positively impacted the change in net sales by $365.7
million. The higher average selling prices were mainly attributable to the
pass-through of higher raw material and logistics costs as well as improved
product and customer mix. Sales volume declined four percent and negatively
impacted the change in net sales by $43.5 million. Foreign currency translation
had a $36.7 million unfavorable impact on the year-over-year change in net
sales. A year-over-year comparison of net sales by region follows:

                                              For the Nine Months Ended
(In thousands)                                      September 30,
                                                                                               Percent
Net Sales                                      2022               2021         Increase        Change
North America                              $    824,095       $    660,061     $ 164,034              25
Europe                                          269,952            209,632        60,320              29
Latin America                                   281,734            221,301        60,433              27
Asia                                             52,430             51,678           752               1
Total Surfactants Segment                  $  1,428,211       $  1,142,672     $ 285,539              25


Net sales for North American operations increased $164.0 million, or 25 percent,
year-over-year. Higher average selling prices favorably impacted the change in
net sales by $175.6 million. The higher average selling prices were mainly
attributable to the pass-through of higher raw material and logistics costs
along with more favorable product and customer mix. A two percent decrease in
sales volume negatively impacted the change in net sales by $10.8 million
between years. The lower sales volume primarily reflects lower demand for
products within the consumer products end markets, principally commodity laundry
products, due to continued raw material availability issues and previously
anticipated lost volume at one customer that chose to invest in internal
production as part of the transition to low 1,4 dioxane products. This decline
was partially offset by higher demand for products sold into the functional
products end markets. Foreign currency translation negatively impacted the
change in net sales by $0.8 million year-over-year.

Net sales for European operations increased $60.3 million, or 29 percent,
year-over-year. Higher average selling prices positively impacted the
year-over-year change in net sales by $93.7 million. The higher average selling
prices were primarily due to the pass-through of higher raw material costs and
improved product and customer mix. Foreign currency translation and a one
percent decline in sales volume negatively impacted the year-over-year change in
net sales by $31.7 million and $1.7 million, respectively. A stronger U.S.
dollar relative to the European euro and British pound sterling led to the
unfavorable foreign currency translation effect. The one percent decrease in
sales volume primarily reflects lower demand for commodity laundry products sold
within the consumer products business partially offset by higher demand for
products sold into the functional products and institutional cleaning end
markets.

Net sales for Latin American operations increased $60.4 million, or 27 percent,
primarily due to higher average selling prices that positively impacted the
change in net sales by $76.0 million. The higher average selling prices were
primarily due to the pass-through of higher raw material costs and improved
product and customer mix. Sales volume declined seven percent and negatively
impacted the change in net sales by $15.7 million. The sales volume decline was
primarily due to lower demand for commodity laundry products within the consumer
products business partially offset by higher demand for products sold into the
functional products end markets. Foreign currency translation positively
impacted the change in net sales by $0.1 million.

                                       31
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Net sales for Asian operations increased $0.8 million, or one percent,
year-over-year. Higher average selling prices positively impacted the
year-over-year change in net sales by $15.1 million and primarily reflected the
pass-through of higher raw material costs. A 19 percent decline in sales volume
and the unfavorable impact of foreign currency translation negatively impacted
the change in net sales by $9.9 million and $4.4 million, respectively. The
decline in sales volume primarily reflects lower demand for commodity laundry
products sold within the consumer products business, partially attributable to
lost market share at one major customer, and lower demand from our distribution
partners.

Surfactant operating income for the first nine months of 2022 increased $7.4
million, or six percent, versus operating income for the first nine months of
2021. Gross profit increased $14.0 million, or seven percent, and operating
expenses increased $6.5 million, or eight percent. Year-over-year comparisons of
gross profit by region and total segment operating expenses and operating income
follow:

                                              For the Nine Months Ended
(In thousands)                                      September 30,
                                                                                 Increase         Percent
Gross Profit and Operating Income             2022                2021          (Decrease)        Change
North America                              $   142,434         $   134,580     $      7,854               6
Europe                                          34,535              29,209            5,326              18
Latin America                                   42,719              41,701            1,018               2
Asia                                             8,249               8,473             (224 )            -3
Surfactants Segment Gross Profit           $   227,937         $   213,963     $     13,974               7
Operating Expenses                              86,943              80,405            6,538               8

Surfactants segment operating profit $140,994 $133,558

    $      7,436               6


Gross profit for North American operations increased $7.9 million, or six
percent, year-over-year. Higher average unit margins positively impacted the
year-over-year change in gross profit by $10.1 million. The higher average unit
margins were mostly attributable to more favorable product and customer mix that
was partially offset by ongoing supply chain challenges and inflationary
pressures. A two percent decline in sales volume negatively impacted the change
in gross profit by $2.2 million.

Gross profit for European operations increased $5.3 million, or 18 percent
year-over-year. Higher average unit margins positively impacted the
year-over-year change in gross profit by $9.4 million. The higher average unit
margins primarily reflect a more favorable product and customer mix. The
unfavorable impact of foreign currency translation and a one percent decline in
sales volume negatively impacted the year-over-year change in gross profit by
$3.8 million and $0.3 million, respectively. A stronger U.S. dollar relative to
the European euro and British pound sterling led to the unfavorable foreign
currency translation effect.

Gross profit for Latin American operations increased $1.0 million, or two
percent, primarily due to improved average unit margins. The higher average unit
margins positively impacted the year-over-year change in gross profit by $3.9
million. A seven percent decline in sales volume negatively impacted the change
in gross profit by $3.0 million. Foreign currency translation had a slightly
favorable $0.1 million impact on the year-over-year change in gross profit.

Gross profit for Asian operations decreased $0.2 million, or three percent. A 19
percent decline in sales volume negatively impacted the change in gross profit
by $1.6 million. Higher average unit margins positively impacted the
year-over-year change in gross profit by $1.4 million.

Operating expenses for the Surfactant segment increased $6.5 million, or eight
percent, year-over-year. This increase was mainly attributable to higher
incentive-based compensation and travel-related expenses, a goodwill impairment
charge at the Company's Philippines subsidiary and higher bad debt provision
expense.

Polymers

Polymer net sales for the first nine months of 2022 increased $101.0 million, or
19 percent, versus net sales for the same period of 2021. Higher average selling
prices favorably impacted the year-over-year change in net sales by $146.7
million. The higher average selling prices were mainly due to the pass through
of higher raw material costs and margin recovery. The unfavorable impact of
foreign currency translation and a two percent decrease in sales volume
negatively impacted the year-over-year change in net sales by $34.6 million and
$11.1 million, respectively. A year-over-year comparison of net sales by region
follows:

                                              For the Nine Months Ended
(In thousands)                                      September 30,
                                                                                 Increase         Percent
Net Sales                                     2022                2021          (Decrease)        Change
North America                              $   357,303         $   270,524     $     86,779              32
Europe                                         251,229             233,625           17,604               8
Asia and Other                                  32,239              35,615           (3,376 )            -9
Total Polymers Segment                     $   640,771         $   539,764     $    101,007              19




                                       32
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Net sales for North American operations increased $86.8 million, or 32 percent,
primarily due to higher average selling prices that positively impacted the
year-over-year change in net sales by $88.4 million. The higher average selling
prices were mainly due to the pass-through of higher raw material costs and
margin recovery. Sales volume declined one percent and negatively impacted the
change in net sales by $1.6 million. Sales volume of polyols used in rigid foam
applications increased three percent during the first nine months of 2022 but
was more than offset by lower sales volume within the phthalic anhydride and
specialty polyols businesses. Sales volume during the first nine months of 2022
was also impacted by a January 2022 power outage at the Company's Elwood,
Illinois (Millsdale) plant site that negatively impacted Polymer production. The
production disruption resulted in the declaration of force majeure for select
products. Production resumed in February 2022 and the force majeure was lifted
in April 2022.

Net sales for European operations increased $17.6 million, or eight percent,
year-over-year. Higher average selling prices favorably impacted the change in
net sales by $55.3 million. The higher average selling prices were primarily due
to the pass-through of higher raw material costs. The unfavorable impact of
foreign currency translation and a one percent decline in sales volume
negatively impacted the change in net sales by $34.2 million and $3.5 million,
respectively. A stronger U.S. dollar relative to the Polish zloty and British
pound sterling led to the unfavorable foreign currency translation effect. The
decline in sales volume reflects weakening construction demand due to the energy
crisis in Europe and customer share loss.

Net sales for Asia and Other operations decreased $3.4 million, or nine percent,
largely due to a 15 percent decline in sales volume which had a $5.4 million
negative impact on the year-over-year change in net sales. The decline in sales
volume was primarily attributable to suppressed demand resulting from recent
COVID lockdowns and restrictions in China. Higher average selling prices
positively impacted the year-over-year change in net sales by $2.4 million. The
unfavorable impact of foreign currency translation had a $0.4 million negative
impact on the change in net sales between years.

Polymer operating income for the first nine months of 2022 increased $19.2
million, or 32 percent, versus operating income for the first nine months 2021.
Gross profit increased $20.6 million, or 25 percent, and operating expenses were
up $1.5 million, or six percent. Year-over-year comparisons of gross profit by
region and total segment operating expenses and operating income follow:

                                              For the Nine Months Ended
(In thousands)                                      September 30,
                                                                                 Increase        Percent
Gross Profit and Operating Income             2022                2021          (Decrease)        Change
North America                              $    61,474         $    43,161     $     18,313             42
Europe                                          40,119              36,821            3,298              9
Asia and Other                                   2,982               3,954             (972 )          -25
Polymers Segment Gross Profit              $   104,575         $    83,936     $     20,639             25
Operating Expenses                              24,670              23,207            1,463              6

Polymers segment operating result $79,905 $60,729

    $     19,176             32


Gross profit for North American operations increased $18.3 million, or 42
percent, primarily due to higher average unit margins. The higher unit margins
positively impacted the year-over-year change in gross profit by $18.6 million.
The higher average unit margins reflect margin recovery and more favorable
product and customer mix as higher rigid polyol sales volume offset lower
phthalic anhydride sales volume. Sales volume declined one percent and
negatively impacted the change in gross profit by $0.3 million.

Gross profit for European operations increased $3.3 million, or nine percent,
primarily due to higher average unit margins that favorably impacted the change
in gross profit by $9.0 million. The unfavorable impact of foreign currency
translation and a one percent decline in sales volume negatively impacted the
change in gross profit by $5.2 million and $0.5 million, respectively.

Gross profit for Asia and Other operations declined $1.0 million, or 25 percent,
due to a 15 percent decline in sales volume and lower average unit margins.
These items negatively impacted the year-over-year change in gross profit by
$0.6 million and a $0.4 million, respectively.

Polymers segment operating expenses increase $1.5 millionor 6%, year-over-year, primarily due to higher incentive compensation and travel-related expenses.

Specialty Products

Specialty Products net sales for the first nine months of 2022 increased $23.6
million, or 44 percent, versus net sales for the first nine months of 2021. This
increase reflects higher average selling prices that were partially offset by a
three percent decline in sales volume. Gross profit and operating income
increased by $10.8 and $11.2 million, respectively. The year-over-year
improvements in gross profit and operating income were mostly attributable to
improved margins and customer mix within the medium chain triglycerides (MCTs)
product line.

                                       33
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Corporate expenses

Corporate expenses, which include deferred compensation, business restructuring
and other operating expenses that are not allocated to the reportable segments,
decreased $7.1 million between years. Corporate expenses were $48.5 million in
the first nine months of 2022 versus $55.6 million in the first nine months of
2021. This decrease was primarily attributable to $13.0 million of deferred
compensation income recognized in the first nine months of 2022 versus $2.1
million of deferred compensation expense recognized in the first nine months of
2021. Partially offsetting this decrease was $10.2 million of higher
environmental remediation reserve expenses recorded in the first nine months of
2022 versus the first nine months of 2021. The higher environmental expenses
were primarily related to revised remediation cost estimates associated with the
Company's Maywood, New Jersey site. Lower year-over-year acquisition-related and
consulting expenses, partially offset by higher incentive-based compensation
expenses, positively impacted the change in corporate expenses.

The $15.2 million decrease in deferred compensation expense was primarily due to
a decrease in the value of mutual fund investment assets held for the plans. In
addition, during the first nine months of 2022 the market price of the Company's
common stock decreased $30.62 per share versus a $6.38 per share decrease during
the first nine months of 2021. The following table presents the period-end
Company common stock market prices used in the computation of deferred
compensation income/expense for the nine months ended September 30, 2022 and
2021:

                                               2022                        2021                       2020
                                           September 30       December 31       September 30       December 31
Company Common Stock Price                 $       93.67     $      124.29  

$112.94 $119.32

CASH AND CAPITAL RESOURCES

Insight

For the nine months ended September 30, 2022, operating activities were a cash
source of $74.9 million versus a source of $21.4 million for the comparable
period in 2021. For the first nine months of 2022, investing cash outflows
totaled $211.9 million versus cash outflows of $306.0 million in the prior year
period. Financing activities were a source of $154.6 million versus a source of
$43.0 million in the prior year period.

Cash and cash equivalents increased $6.5 million compared to December 31, 2021,
inclusive of an $11.1 million unfavorable foreign exchange rate impact. On
September 30, 2022, the Company's cash and cash equivalents totaled $165.7
million. Cash in U.S. demand deposit accounts and certificates of deposit
totaled $45.6 million and cash in U.S. money market funds totaled $17.6 million.
The Company's non-U.S. subsidiaries held $102.5 million of cash as of September
30, 2022.

Operating Activity

Net income during the first nine months of 2022 increased $15.5 million versus
the comparable period in 2021. Working capital was a cash use of $145.0 million
during the first nine months of 2022 versus a use of $121.7 million in the
comparable period in 2021.

Accounts receivable were a use of $82.5 million during the first nine months of
2022 compared to a use of $96.8 million for the comparable period of 2021.
Inventories were a use of $100.1 million in 2022 versus a use of $63.8 million
in 2021. Accounts payable and accrued liabilities were a source of $42.6 million
in 2022 compared to a source of $39.2 million for the same period in 2021.

Working capital requirements were higher in the first nine months of 2022
compared to 2021 primarily due to the changes noted above. The major driver of
the increase in working capital was inventories due to both higher quantities
and raw material costs. The higher quantities partially reflect inventory builds
in advance of the Company's planned maintenance activity at its North American
phthalic anhydride plant during the fourth quarter of 2022. It is management's
opinion that the Company's liquidity is sufficient to provide for potential
increases in working capital requirements during 2022.

Investing activity

Cash used for investing activities decreased $94.2 million year-over-year. This
decrease primarily reflects the Company's acquisition of INVISTA's aromatic
polyester polyol business and associated assets for $183.7 million, net of cash
received, during the first nine months in 2021. Partially offsetting the above,
cash used for capital expenditures was $205.3 million in the first nine months
of 2022 versus $119.5 million in 2021. The higher capital spending in 2022 is
largely attributable to the alkoxylation plant the Company is building at its
Pasadena, Texas site and equipment upgrades to meet future regulatory limits on
1,4 Dioxane in the United States.

For 2022, the Company estimates that total capital expenditures will be in the
range of $330.0 million to $350.0 million. This projected spending includes the
new alkoxylation plant that is being built in Pasadena, Texas, equipment
upgrades to meet future regulatory limits on 1,4 Dioxane in the United States,
growth initiatives, infrastructure and optimization spending in the United
States, Germany and Mexico.

                                       34
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Fundraising activity

Cash flow from financing activities was a source of $154.6 million in 2022
versus a source of $43.0 million in 2021. The year-over-year change is primarily
due to a higher level of borrowing from the Company's revolving credit facility
and a $100.0 million delayed draw term loan during the first nine months of 2022
versus the same period in 2021.

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. For the nine months ended September 30, 2022, the Company
purchased 222,720 shares of its common stock on the open market at a total cost
of $22.3 million. At September 30, 2022, the Company had $127.7 million
remaining under the share repurchase program authorized by its Board of
Directors.

Debts and credit facilities

Consolidated balance sheet debt increased from $363.6 million on December 31,
2021 to $564.9 million on September 30, 2022, primarily due to higher domestic
debt, which includes borrowings from the Company's revolving credit agreement
and new private placement notes issued during the first quarter of 2022. Net
debt (which is defined as total debt minus cash - see the "Reconciliation of
Non-GAAP Net Debt" section of this MD&A) increased $194.8 million, from $204.4
million at December 31, 2021 to $399.2 million at September 30, 2022. This
change was due to a debt increase of $201.3 million partially offset by a cash
increase of $6.5 million. The cash increase primarily reflects the new debt
borrowings and cash from operations, largely offset by scheduled debt
repayments, capital expenditures, dividends, share repurchases and the
previously announced third quarter 2022 acquisition of the PerformanX Specialty
Chemicals surfactant business.

As of September 30, 2022, the ratio of net debt to net debt plus shareholders'
equity was 26.1 percent versus 16.0 percent at December 31, 2021 (see the
"Reconciliation of Non-GAAP Net Debt" section in this MD&A for further details).
On September 30, 2022, the Company's debt included $407.1 million of unsecured
notes, with maturities ranging from 2022 through 2032, that were issued to
insurance companies in private placement transactions pursuant to note purchase
agreements, a $100.0 million delayed draw term loan borrowed pursuant to the
Company's credit agreement, $55.0 million of short term loans borrowed under its
revolving credit facility and $2.8 million of foreign credit line borrowings.
The proceeds from the note issuances have been the Company's primary source of
long-term debt financing and are supplemented by borrowings under bank credit
facilities to meet short and medium-term liquidity needs.

On March 1, 2022, pursuant to a note purchase and master note agreement dated as
of June 10, 2021 (the NYL note purchase agreement), the Company issued and sold
$25.0 million in aggregate principal amount of its 2.83% Senior Notes, Series
2022-A, due March 1, 2032 (the Series 2022-A Notes). In addition, on March 1,
2022, pursuant to a note purchase and private shelf agreement dated as of June
10, 2021 (the Prudential note purchase agreement), the Company issued and sold
$50.0 million in aggregate principal amount of its 2.83% Senior Notes, Series
2022-B, due March 1, 2032 (the Series 2022-B Notes). The Series 2022-A Notes and
the Series 2022-B Notes bear interest at a fixed rate of 2.83%, with interest to
be paid semi-annually and with equal annual principal payments beginning on
March 1, 2026 and continuing through final maturity on March 1, 2032. The
proceeds of the issuance of the Series 2022-A Notes and the Series 2022-B Notes
are being used primarily for capital expenditures, to pay down existing debt and
for other corporate purposes. The NYL note purchase agreement and the Prudential
note purchase agreement require the maintenance of certain financial ratios and
covenants that are substantially similar to the Company's existing long-term
debt and provide for customary events of default.

On June 24, 2022, the Company entered into a credit agreement with a syndicate
of banks. The credit agreement provides for credit facilities in an initial
aggregate principal amount of $450.0 million, consisting of (a) a $350.0 million
multi-currency revolving credit facility and (b) a $100.0 million delayed draw
term loan credit facility, each of which matures on June 24, 2027. This credit
agreement replaced the Company's prior $350.0 million revolving credit
agreement. This credit agreement allows the Company to make unsecured
borrowings, as requested from time to time, to finance working capital needs,
permitted acquisitions, capital expenditures and for general corporate purposes.
This unsecured facility is the Company's primary source of short-term
borrowings. As of September 30, 2022, the Company had outstanding loans totaling
$155.0 million, inclusive of a $100.0 million delayed draw term loan, and
letters of credit totaling $6.8 million under the credit agreement, with $288.2
million remaining available.

The Company anticipates that cash from operations, committed credit facilities
and cash on hand will be sufficient to fund anticipated capital expenditures,
working capital, dividends and other planned financial commitments for the
foreseeable future.

Certain foreign subsidiaries of the Company maintain short-term bank lines of
credit in their respective local currencies to meet working capital requirements
as well as to fund capital expenditures and acquisitions. At September 30, 2022,
the Company's foreign subsidiaries had $2.8 million of outstanding debt.

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The Company is subject to covenants under its material debt agreements that
require the maintenance of minimum interest coverage and minimum net worth.
These agreements also limit the incurrence of additional debt as well as the
payment of dividends and repurchase of shares. Under the most restrictive of
these debt covenants:

1. The Company is required to maintain a minimum interest coverage ratio,

as defined in the agreements, from 3.50 to 1.00, for

        four calendar quarters.



     2. The Company is required to maintain a maximum net leverage ratio, as
        defined within the agreements, not to exceed 3.50 to 1.00.


3. The Company is required to maintain a net worth of at least $750.0 million.

4. The Company is authorized to pay dividends and to purchase own shares

after June 24, 2022in quantities up to $100.0 million over 100 percent

net income and cash proceeds from the exercise of stock options, measured

starting cumulatively January 1, 2022. The maximum amount of dividends

        that could have been paid within this limitation is disclosed as
        unrestricted retained earnings in Note 14, Debt, of the notes to the
        Company's condensed consolidated financial statements (included in Item
        1 of this Form 10-Q).

The Company believes that it was in compliance with all of its covenants at
September 30, 2022.

ENVIRONMENTAL AND LEGAL ISSUES

The Company's operations are subject to extensive federal, state and local
environmental laws and regulations and similar laws in the other countries in
which the Company does business. Although the Company's environmental policies
and practices are designed to ensure compliance with these laws and regulations,
future developments and increasingly stringent environmental regulation may
require the Company to make additional unforeseen environmental expenditures.
The Company will continue to invest in the equipment and facilities necessary to
comply with existing and future regulations. During the first nine months of
2022 and 2021, the Company's expenditures for capital projects related to the
environment were $8.5 million and $8.8 million, respectively. These projects are
capitalized and depreciated over their estimated useful lives, which are
typically 10 years. Recurring costs associated with the operation and
maintenance of facilities for waste treatment and disposal and managing
environmental compliance in ongoing operations at the Company's manufacturing
locations were $26.8 million and $24.8 million for the nine months ended
September 30, 2022 and 2021, respectively.

Over the years, the Company has received requests for information related to or
has been named by the government as a potentially responsible party at a number
of waste disposal sites where cleanup costs have been or may be incurred under
CERCLA and similar state or foreign statutes. In addition, damages are being
claimed against the Company in general liability actions for alleged personal
injury or property damage in the case of some disposal and plant sites. The
Company believes that it has made adequate provisions for the costs it is likely
to incur with respect to these sites. It is the Company's accounting policy to
record liabilities when environmental assessments and/or remedial efforts are
probable, and the cost or range of possible costs can be reasonably estimated.
When no amount within the range is a better estimate than any other amount, the
minimum is accrued. Estimating the possible costs of remediation requires making
assumptions related to the nature and extent of contamination and the methods
and resulting costs of remediation. Some of the factors on which the Company
bases its estimates include information provided by decisions rendered by State
and Federal environmental regulatory agencies, information provided by
feasibility studies, and remedial action plans developed. After partial
remediation payments at certain sites, the Company has estimated a range of
possible environmental and legal losses of $33.3 million to $57.0 million at
September 30, 2022 and $23.1 million to $41.7 million at December 31, 2021.
Within the range of possible environmental losses, management has currently
concluded that no single amount is more likely to occur than any other amounts
in the range and, thus, has accrued at the lower end of the range; these
accruals totaled $33.3 million at September 30, 2022 and $23.1 million at
December 31, 2021. This increase primarily reflects revised environmental cost
estimates for the Company's Maywood, New Jersey site due to USEPA work plan
approvals and the receipt of third party contractor bids during the third
quarter of 2022. Because the liabilities accrued are estimates, actual amounts
could differ materially from the amounts reported. Cash expenditures related to
legal and environmental matters were $1.5 million for the nine months ended
September 30, 2022, compared to $2.5 million for the same period in 2021.

For certain sites, the Company has responded to information requests made by
federal, state or local government agencies but has received no response
confirming or denying the Company's stated positions. As such, estimates of the
total costs, or range of possible costs, of remediation, if any, or the
Company's share of such costs, if any, cannot be determined with respect to
these sites. Consequently, the Company is unable to predict the effect thereof
on the Company's financial position, cash flows and results of operations. Based
upon the Company's present knowledge with respect to its involvement at these
sites, the possibility of other viable entities' responsibilities for cleanup,
and the extended period over which any costs would be incurred, management
believes that the Company has no material liability at these sites and that
these matters, individually and in the aggregate, will not have a material
effect on the Company's financial position. Certain of these matters are
discussed in Item 1, Part 2, of the Company's Annual Report on Form

                                       36
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10-K, Legal Proceedings, in this report and in other filings of the Company with
the SEC, which are available upon request from the Company. See also Note 8,
Contingencies, in the notes to the Company's condensed consolidated financial
statements (included in Item 1 of this Form 10-Q) for a summary of the
significant environmental proceedings related to certain environmental sites.

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OUTLOOK

Management believes that its Surfactant, Polymer and Specialty Products segments
should all deliver full year earnings growth versus the prior year. Management
believes that Surfactant products sold into the functional products and
industrial cleaning end markets should deliver full year volume growth versus
2021. Despite short-term volatility and challenges, management believes the
long-term outlook for rigid polyols will remain attractive as energy
conservation efforts and more stringent building codes are expected to continue.
Management anticipates higher incremental expenses, primarily related to planned
maintenance activity at the Company's North American phthalic anhydride plant
and low 1,4 dioxane transition costs, during the fourth quarter of 2022. Looking
forward to the next few quarters, management believes the Company will be
challenged by slowing global economic growth, weakening consumer and
construction demand, continued inflationary pressures and a stronger U.S.
dollar.

CRITICAL ACCOUNTING METHODS

The Company no longer considers the prior year (a) Business Combinations and (b)
Goodwill and Intangible Assets accounting policies as continuing to be critical
during the first nine months of 2022 because the Company has made no material
acquisitions in 2022. Other than these items there have been no material changes
to the critical accounting policies disclosed in the Company's 2021 Annual
Report on Form 10-K.

Non-GAAP reconciliations

The Company believes that certain non-GAAP measures, when presented in
conjunction with comparable GAAP measures, are useful for evaluating the
Company's performance and financial condition. Internally, the Company uses this
non-GAAP information as an indicator of business performance and evaluates
management's effectiveness with specific reference to these indicators. These
measures should be considered in addition to, not as substitutes for or superior
to, measures of financial performance prepared in accordance with GAAP. The
Company's definitions of these measures may differ from similarly titled
measures used by other entities.

Reconciliation of adjusted non-GAAP net earnings to earnings per share

Management uses the non-GAAP adjusted net income metric to evaluate the
Company's operating performance. Management excludes the items listed in the
table below because they are non-operational items. The cumulative tax effect
was calculated using the statutory tax rates for the jurisdictions in which the
noted transactions occurred.

                                                                    Three Months Ended
(In millions, except per share amounts)           September 30, 2022                   September 30, 2021
                                            Net Income         Diluted EPS       Net Income         Diluted EPS
Net Income Attributable to the Company
as Reported                                $       39.4       $        1.71 

$36.9 $1.59

                                                              $           -
Deferred Compensation (Income) Expense
(including
  related investment activity)                     (1.2 )             (0.05 )           (1.5 )             (0.06 )
Business Restructuring                              0.1                   -              0.1                   -
Cash Settled Stock Appreciation Rights             (0.2 )             (0.01 )           (0.2 )             (0.01 )
Remediation Expense                                10.4                0.45              0.9                0.04
Cumulative Tax Effect on Above
Adjustment Items                                   (2.2 )             (0.09 )            0.2                0.01
Adjusted Net Income                        $       46.3       $        2.01     $       36.4       $        1.57



                                                                  Nine Months Ended
(In millions, except per share amounts)         September 30, 2022          

September 30, 2021

                                           Net Income       Diluted EPS      Net Income        Diluted EPS
Net Income Attributable to the Company
as Reported                                $     136.3     $        5.90    

$120.8 $5.19

                                                           $           -
Deferred Compensation (Income) Expense
(including
  related investment activity)                    (5.7 )           (0.25 )          (0.9 )            (0.04 )
Business Restructuring                             0.2              0.01             0.3               0.01
Cash Settled Stock Appreciation Rights            (0.6 )           (0.03 )             -                  -
Remediation Expense                               11.0              0.48            0.90               0.04
Cumulative Tax Effect on Above
Adjustment Items                                  (1.2 )           (0.05 )          (0.1 )                -
Adjusted Net Income                        $    140.00     $        6.06     $     121.0      $        5.20




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Reconciliation of non-GAAP net debt

Management uses the non-GAAP net debt measure to get a more complete picture of the company’s overall liquidity, financial flexibility and level of indebtedness.

                                                    September 30,       December 31,
(In millions)                                           2022                

2021

Current long-term debt maturities as presented $ $98.1

     40.7
Long-Term Debt as Reported                                   466.8              322.9
Total Debt as Reported                                       564.9              363.6
Less Cash and Cash Equivalents as Reported                  (165.7 )           (159.2 )
Net Debt                                           $         399.2     $        204.4
Equity                                             $       1,130.2     $      1,074.2
Net Debt plus Equity                               $       1,529.4     $      1,278.6
Net Debt/(Net Debt plus Equity)                                 26 %               16 %




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