STEPAN CO Fair Value Disclosure
2. Fair Value Measurements
The following were the financial instruments held by the Company at December 31, 2025 and 2024, and the methods and assumptions used to estimate the instruments’ fair values:
Cash and cash equivalents
Carrying value approximated fair value because of the short maturity of the instruments. Fair value of cash and cash equivalents is a Level 1 measurement. The Company’s cash and cash equivalents included money market funds totaling $13,807,000 and $12,589,000 at December 31, 2025 and December 31, 2024, respectively.
Derivative assets and liabilities
Derivative assets and liabilities include the foreign currency exchange and interest rate swap contracts discussed in Note 3, Derivative Instruments, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K). Fair value and carrying value were the same because the contracts were recorded at fair value. The fair values of the foreign currency contracts were calculated as the difference between the applicable forward foreign exchange rates at the reporting date and the contracted foreign exchange rates multiplied by the contracted notional amounts. The fair value of the interest rate swaps was calculated as the difference between the contracted swap rate and the floating interest rate multiplied by the present value of the notional amount of the contract. The Company’s fair value measurements for derivative assets and liabilities fall within Level 2 of the fair value hierarchy.
See the table that follows the financial instrument descriptions for the reported fair values of derivative assets and liabilities.
Long-term investments
Long-term investments include the mutual fund assets the Company held to fund a portion of its deferred compensation liabilities and all of its non-qualified supplemental executive defined contribution obligations. See the defined contribution plans section of Note 13, Postretirement Benefit Plans, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K). Fair value and carrying value were the same because the mutual fund assets were recorded at fair value in accordance with the FASB’s fair value option guidance. Fair values for the mutual funds were calculated using the published market price per unit at the reporting date multiplied by the number of units held at the reporting date. As a result, the Company’s fair value measurements for mutual fund assets fall within Level 1 of the fair value hierarchy.
See the table that follows the financial instrument descriptions for the reported fair value of long-term investments.
Debt obligations
The fair value of debt with original maturities greater than one year comprised the combined present values of scheduled principal and interest payments for each of the various loans, individually discounted at rates equivalent to those which could be obtained by the Company for new debt issues with durations equal to the average life to maturity of each loan. The fair values of the remaining Company debt obligations approximated their carrying values due to the short-term nature of the debt. The Company’s fair value measurements for debt fall in level 2 of the fair value hierarchy.
At December 31, 2025 and 2024, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $275,000 and $404,000 as of December 31, 2025 and 2024, respectively):
|
|
December 31 |
|
|||||
(In thousands) |
|
2025 |
|
|
2024 |
|
||
Fair value |
|
$ |
619,027 |
|
|
$ |
598,864 |
|
Carrying value |
|
|
626,985 |
|
|
|
625,843 |
|
The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of December 31, 2025 and 2024, and the level within the fair value hierarchy in which the fair value measurement falls:
(In thousands) |
|
December 31, |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Mutual fund assets |
|
$ |
21,270 |
|
|
$ |
21,270 |
|
|
$ |
— |
|
|
$ |
— |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate contracts |
|
|
1,974 |
|
|
|
— |
|
|
|
1,974 |
|
|
|
— |
|
Foreign currency contracts |
|
|
423 |
|
|
|
— |
|
|
|
423 |
|
|
|
— |
|
Total assets at fair value |
|
$ |
23,667 |
|
|
$ |
21,270 |
|
|
$ |
2,397 |
|
|
$ |
— |
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts |
|
$ |
340 |
|
|
$ |
— |
|
|
$ |
340 |
|
|
$ |
— |
|
(In thousands) |
|
December 31, |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Mutual fund assets |
|
$ |
25,558 |
|
|
$ |
25,558 |
|
|
$ |
— |
|
|
$ |
— |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate contracts |
|
|
4,934 |
|
|
|
— |
|
|
|
4,934 |
|
|
|
— |
|
Foreign currency contracts |
|
|
1,386 |
|
|
|
— |
|
|
|
1,386 |
|
|
|
— |
|
Total assets at fair value |
|
$ |
31,878 |
|
|
$ |
25,558 |
|
|
$ |
6,320 |
|
|
$ |
— |
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts |
|
$ |
752 |
|
|
$ |
— |
|
|
$ |
752 |
|
|
$ |
— |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 24, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.