UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                            ----------------------

                                   FORM 10-Q

(MARK ONE)
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

(_)   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      FOR THE TRANSITION PERIOD FROM ______________ TO __________

                                    1-4462
                         ----------------------------
                            Commission File Number

                                STEPAN COMPANY
- --------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

             Delaware                                          36 1823834
- ------------------------------------                  --------------------------
  (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                       Identification Number)


              Edens and Winnetka Road, Northfield, Illinois 60093
- --------------------------------------------------------------------------------
                   (Address of principal executive offices)

Registrant's telephone number                                 (847) 446-7500
                                                      --------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                                 Yes  X   No ___
                                                                     ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

              Class                               Outstanding at April 30, 2001
- ---------------------------------              --------------------------------

   Common Stock, $1 par value                              9,252,219


Part I                         FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Item 1 - Financial Statements

                                STEPAN COMPANY
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                     March 31, 2001 and December 31, 2000
                                   Unaudited



(Dollars in thousands)                                                                 3/31/01         12/31/00
                                                                                       -------         --------
ASSETS
- ------
                                                                                               
CURRENT ASSETS:
   Cash and cash equivalents                                                            $   3,902    $   3,536
   Receivables, net                                                                       108,557       98,488
   Inventories (Note 2)                                                                    52,679       60,132
   Deferred income taxes                                                                   10,866       10,866
   Other current assets                                                                     5,099        4,191
                                                                                        ---------    ---------
        Total current assets                                                              181,103      177,213
                                                                                        ---------    ---------

PROPERTY, PLANT AND EQUIPMENT:
   Cost                                                                                   622,085      619,296
   Less: Accumulated depreciation                                                         427,947      420,149
                                                                                        ---------    ---------
                                                                                          194,138      199,147

OTHER ASSETS                                                                               38,097       38,689
                                                                                        ---------    ---------

               Total assets                                                             $ 413,338    $ 415,049
                                                                                        =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
   Current maturities of long-term debt                                                 $  10,862    $   9,586
   Accounts payable                                                                        49,905       57,255
   Accrued liabilities                                                                     34,607       39,121
                                                                                        ---------    ---------
        Total current liabilities                                                          95,374      105,962
                                                                                        ---------    ---------

DEFERRED INCOME TAXES                                                                      38,117       39,170
                                                                                        ---------    ---------

LONG-TERM DEBT, less current maturities                                                   103,731       96,466
                                                                                        ---------    ---------

OTHER NON-CURRENT LIABILITIES                                                              21,508       19,275
                                                                                        ---------    ---------

STOCKHOLDERS' EQUITY:
   5-1/2% convertible preferred stock, cumulative, voting without par value;
       authorized 2,000,000 shares; issued 583,252 shares in 2001 and 583,469
       shares in 2000                                                                      14,581       14,587
   Common stock, $1 par value; authorized 30,000,000 shares;
      issued 9,464,053 shares in 2001 and 9,411,106 shares in 2000                          9,464        9,411
   Additional paid-in capital                                                              14,049       13,343
   Accumulated other comprehensive loss                                                   (13,913)     (12,402)
   Retained earnings (approximately $47,023 unrestricted in 2001 and $46,125 in 2000)     135,116      133,308
                                                                                        ---------    ---------

   Less: Treasury stock, at cost                                                            4,689        4,071
                                                                                        ---------    ---------
         Stockholders' equity                                                             154,608      154,176
                                                                                        ---------    ---------

               Total liabilities and stockholders' equity                               $ 413,338    $ 415,049
                                                                                        =========    =========


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed consolidated balance sheets.


                                STEPAN COMPANY
                       CONSOLIDATED STATEMENTS OF INCOME
              For the Three Months Ended March 31, 2001 and 2000
                                   Unaudited



(In thousands, except per share amounts)                             Three Months
                                                                    Ended March 31
                                                           --------------------------------
                                                               2001                2000
                                                               ----                ----
                                                                         
NET SALES                                                     $ 176,857        $ 174,988
Cost of Sales                                                   150,956          147,905
                                                              ---------        ---------
Gross Profit                                                     25,901           27,083
                                                              ---------        ---------

Operating Expenses:
   Marketing                                                      6,241            6,176
   Administrative                                                 6,200            6,149
   Research, Development and Technical Services                   5,631            5,758
                                                              ---------        ---------
                                                                 18,072           18,083
                                                              ---------        ---------

Operating Income                                                  7,829            9,000

Other Income (Expense):
   Interest, Net                                                 (1,956)          (2,051)
   Income from Equity Joint Venture                                 127               54
                                                              ---------        ---------
                                                                 (1,829)          (1,997)
                                                              ---------        ---------

Income Before Income Taxes                                        6,000            7,003
Provision for Income Taxes                                        2,372            2,732
                                                              ---------        ---------
NET INCOME                                                    $   3,628        $   4,271
                                                              =========        =========


Net Income Per Common Share (Note 4):
   Basic                                                      $    0.37        $    0.43
                                                              =========        =========
   Diluted                                                    $    0.36        $    0.41
                                                              =========        =========

Shares Used to Compute Net Income Per Common Share (Note 4):
   Basic                                                          9,241            9,501
                                                              =========        =========
   Diluted                                                       10,154           10,416
                                                              =========        =========

Dividends per Common Share                                    $  0.1750        $  0.1625
                                                              =========        =========


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.


                                STEPAN COMPANY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Three Months Ended March 31, 2001 and 2000
                                   Unaudited



(Dollars in thousands)                                                 3/31/01        3/31/00
                                                                       -------        -------
                                                                                
NET CASH FLOW FROM OPERATING ACTIVITIES
   Net income                                                          $  3,628       $  4,271
   Depreciation and amortization                                         10,099         10,307
   Deferred revenue recognition                                            (126)          (755)
   Deferred income taxes                                                 (1,042)          (239)
   Environmental and legal liabilities                                      156             25
   Other non-cash items                                                   2,068             45
   Changes in Working Capital:
      Receivables, net                                                  (10,069)          (778)
      Inventories                                                         7,453            316
      Accounts payable and accrued liabilities                          (11,864)        (9,801)
      Other                                                                (908)          (590)
                                                                       --------       --------
         Net Cash Provided by (Used for) Operating Activities              (605)         2,801
                                                                       --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Expenditures for property, plant and equipment                        (5,184)        (5,436)
   Other non-current assets                                                  54             23
                                                                       --------       --------
      Net Cash Used for Investing Activities                             (5,130)        (5,413)
                                                                       --------       --------

CASH FLOWS FROM FINANCING AND OTHER RELATED ACTIVITIES
   Revolving debt and notes payable to banks, net                         7,300          5,200
   Other debt borrowings                                                  1,241           --
   Other debt repayments                                                   --             (153)
   Purchases of treasury stock, net                                        (618)          (239)
   Dividends paid                                                        (1,820)        (1,754)
   Stock option exercises                                                   762            157
   Other non-cash items                                                    (764)          (548)
                                                                       --------       --------
      Net Cash Provided by Financing and Other Related Activities         6,101          2,663
                                                                       --------       --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                   366             51
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                            3,536          3,969
                                                                       --------       --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $  3,902       $  4,020
                                                                       ========       ========

CASH PAID DURING THE PERIOD FOR:
   Interest                                                            $    726       $    739
   Income taxes                                                        $    (52)      $   (163)


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.


                                STEPAN COMPANY
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     March 31, 2001 and December 31, 2000
                                   Unaudited

1.       CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
         -------------------------------------------

         The condensed consolidated financial statements included herein have
         been prepared by the company, without audit, pursuant to the rules and
         regulations of the Securities and Exchange Commission. Certain
         information and footnote disclosures normally included in financial
         statements prepared in accordance with generally accepted accounting
         principles have been condensed or omitted pursuant to such rules and
         regulations, although management believes that the disclosures are
         adequate and make the information presented not misleading. It is
         suggested that these condensed consolidated financial statements be
         read in conjunction with the financial statements and the notes thereto
         included in the company's latest Annual Report to Stockholders and the
         Annual Report to the Securities and Exchange Commission on Form 10-K
         for the year ended December 31, 2000. In the opinion of management all
         adjustments, consisting only of normal recurring adjustments, necessary
         to present fairly the consolidated financial position of Stepan Company
         as of March 31, 2001, and the consolidated results of operations and
         cash flows for the three months then ended, have been included.

2.       INVENTORIES
         -----------

         Inventories include the following amounts:


                                                                                          
                (Dollars in thousands)                                        3/31/01           12/31/00
                                                                              -------           --------
                Inventories valued primarily on LIFO basis -
                   Finished products                                         $ 34,092           $ 40,515
                   Raw materials                                               18,587             19,617
                                                                             --------           --------
                Total inventories                                            $ 52,679           $ 60,132
                                                                             ========           ========


         If the first-in, first-out (FIFO) inventory valuation method had been
         used for all inventories, inventory balances would have been
         approximately $8,900,000 higher than reported at March 31, 2001, and
         December 31, 2000.

3.       CONTINGENCIES
         -------------

         There are a variety of legal proceedings pending or threatened against
         the company. Some of these proceedings may result in fines, penalties,
         judgments or costs being assessed against the company at some future
         time. The company's operations are subject to extensive local, state
         and federal regulations, including the federal Comprehensive
         Environmental Response, Compensation and Liability Act of 1980
         ("Superfund") and the Superfund amendments of 1986. The company, and
         others, have been named as


         potentially responsible parties at affected geographic sites. As
         discussed in Management's Discussion and Analysis of Financial
         Condition and Results of Operations included in this filing, the
         company believes that it has made adequate provisions for the costs it
         may incur with respect to these sites.

         The company has estimated a range of possible environmental and legal
         losses from $7.3 million to $34.5 million at March 31, 2001. The
         company's reserve at March 31, 2001, and December 31, 2000, were $16.8
         million and $16.6 million, respectively.

         For certain sites, estimates cannot be made of the total costs of
         compliance, or the company's share of such costs; accordingly, the
         company is unable to predict the effect thereof on future results of
         operations. In the event of one or more adverse determinations in any
         annual or interim period, the impact on results of operations for those
         periods could be material. However, based upon the company's present
         belief as to its relative involvement at these sites, other viable
         entities' responsibilities for cleanup and the extended period over
         which any costs would be incurred, the company believes that these
         matters will not have a material effect on the company's financial
         position. Certain of these matters are discussed in Item 3, Legal
         Proceedings, in the 2000 Form 10-K Annual Report, Item 1, Legal
         Proceedings, in this Form 10-Q, and in other filings of the company
         with the Securities and Exchange Commission, which are available upon
         request from the company.

         Following are summaries of the environmental proceedings related to the
         company's Maywood, New Jersey, and Ewan and D'Imperio environmental
         sites:

         Maywood, New Jersey, Site:
         -------------------------

         As reported previously, the company's site in Maywood, New Jersey and
         property formerly owned by the company adjacent to its current site,
         were listed on the National Priorities List in September 1993 pursuant
         to the provisions of the Comprehensive Environmental Response
         Compensation and Liabilities Act (CERCLA) because of certain alleged
         chemical contamination. Pursuant to an Administrative Order on Consent
         entered into between the United States Environmental Protection Agency
         (USEPA) and the company for property formerly owned by the company, and
         the issuance of an order by USEPA to the company for property currently
         owned by the company, the company completed a Remedial Investigation
         Feasibility Study (RI/FS) in 1994. In addition, the company submitted a
         Feasibility Study Addendum to USEPA in October 2000. The company has
         been awaiting the issuance of a Record of Decision (ROD) from USEPA
         which would relate to both the currently owned and formerly owned
         company property and would recommend the type of remediation required
         on each property. The company anticipates that USEPA will issue the
         proposed ROD sometime during fiscal year 2001 or 2002 with a public
         comment period to follow. The final ROD will be issued sometime after
         the public comment period.


         In 1985, the company entered into a Cooperative Agreement with the
         United States of America represented by the Department of Energy
         (Agreement). Pursuant to this Agreement, the Department of Energy (DOE)
         took title to radiological contaminated materials and was to remediate,
         at its expense, all radiological waste on the company's property in
         Maywood, New Jersey. The Maywood property (and portions of the
         surrounding area) was being remediated by the DOE under the Formerly
         Utilized Sites Remedial Action Program, a federal program under which
         the U.S. Government undertook to remediate properties which were used
         to process radiological material for the U.S. Government. In 1997,
         responsibility for this clean-up was transferred to the United States
         Army Corps of Engineers (USACE). On January 29, 1999, the company
         received a copy of a USACE Report to Congress dated January 1998 in
         which the USACE expressed their intention to evaluate, with the USEPA,
         whether the company and/or other parties might be responsible for cost
         recovery or contribution claims related to the Maywood site. Subsequent
         to the issuance of that report, the USACE advised the company that it
         had requested legal advice from the Department of Justice as to the
         impact of the Agreement.

         By letter dated July 28, 2000, the Department of Justice advised the
         company that the USACE and USEPA had referred to the Justice Department
         claims against the company for response costs incurred or to be
         incurred by the USACE, USEPA and the DOE in connection with the Maywood
         site and the Justice Department stated that the United States is
         entitled to recovery of its response costs from the company under
         CERCLA. The letter referred to both radiological and non-radiological
         hazardous waste at the Maywood site and stated that the United States
         has incurred unreimbursed response costs to date of $138 million. Costs
         associated with radiological waste at the Maywood site, which the
         company believes represent all but a small portion of the amount
         referred to in the Justice Department letter, could be expected to
         aggregate substantially in excess of that amount. In the letter, the
         Justice Department invited the company to discuss settlement of the
         matter in order to avoid the need for litigation. The company believes
         that its liability, if any, for such costs has been resolved by the
         aforesaid Agreement. Despite the fact that the company continues to
         believe that it has no liability to the United States for such costs,
         discussions with the Justice Department are currently ongoing to
         attempt to resolve this matter.

         The company believes it has adequate reserves for claims associated
         with the Maywood site. However, depending on the results of the ongoing
         discussions regarding the Maywood site, the final cost of the
         remediation could differ from the current estimates.

         Ewan and D'Imperio Site:
         -----------------------

         As reported previously, the company has been named as a potentially
         responsible party (PRP) in the case USEPA v. Jerome Lightman (92 CV
         4710 D. N. J.) which involves the Ewan and D'Imperio Superfund Sites
         located in New Jersey. Trial on the issue of the company's liability at
         these sites was completed in March 2000. The company is awaiting a
         decision from the court. If the company is found liable at either site,
         a second trial as to the company's allocated share of clean-up costs at
         these sites will likely be held


         in late 2001 or 2002. The company believes it has adequate defenses to
         the issue of liability. In the event of an unfavorable outcome related
         to the issue of liability, the company believes it has adequate
         reserves.

         Regarding the D'Imperio Superfund Site, USEPA has indicated it will
         seek penalty claims against the company based on the company's alleged
         noncompliance with the modified Unilateral Administrative Order. The
         company is currently negotiating with USEPA to settle its proposed
         penalty against the company. In addition, the company also received
         notice from the New Jersey Department of Environmental Protection
         (NJDEP) dated March 21, 2001, that NJDEP has indicated it will pursue
         cost recovery against the alleged responsible parties, including the
         company. The NJDEP's claims include costs related to remediation of the
         D'Imperio Superfund Site in the amount of $434,405.53 and alleged
         natural resource damages in the amount of $529,584.00 (as of November
         3, 2000). The NJDEP has proposed settling such claims, with the company
         being responsible for a portion of these costs. The company is
         currently investigating its options with respect to both of these
         potential actions but does not believe that such settlements, if any,
         will have a material impact on the financial condition of the company.


4.       EARNINGS PER SHARE
         ------------------

         Below is the computation of basic and diluted earnings per share for
         the three months ended March 31, 2001 and 2000.



         (In thousands, except per share amounts)                                     Three Months
                                                                                     Ended March 31
                                                                              --------------------------
                                                                                   2001         2000
                                                                                 -------      -------
                                                                                        
         Computation of Basic Earnings per Share
         ---------------------------------------
         Net income                                                              $ 3,628      $ 4,271
         Deduct dividends on preferred stock                                         201          207
                                                                                 -------      -------
         Income applicable to common stock                                       $ 3,427      $ 4,064
                                                                                 =======      =======

         Weighted-average number of shares outstanding                             9,241        9,501

         Basic earnings per share                                                $  0.37      $  0.43
                                                                                 =======      =======

         Computation of Diluted Earnings per Share
         -----------------------------------------
         Net income                                                              $ 3,628      $ 4,271

         Weighted-average number of shares outstanding                             9,241        9,501
         Add net shares issuable from assumed exercise of options
            (under treasury stock method)                                            247          223
         Add weighted-average shares issuable from assumed conversion of
         convertible preferred stock                                                 666          692
                                                                                 -------      -------

         Shares applicable to diluted earnings                                    10,154       10,416
                                                                                 =======      =======

         Diluted earnings per share                                              $  0.36      $  0.41
                                                                                 =======      =======



5.       COMPREHENSIVE INCOME
         --------------------

         Below is the company's comprehensive income for the three months ended
         March 31, 2001 and 2000.



         (Dollars in thousands)                                          Three Months Ended
                                                                         ------------------
                                                                             March 31
                                                                             --------
                                                                      2001               2000
                                                                    --------           --------
                                                                                 
         Net income                                                 $  3,628           $  4,271
         Other comprehensive loss:
            Foreign currency translation adjustments                  (1,511)              (646)
                                                                    --------           --------
         Comprehensive income                                       $  2,117           $  3,625
                                                                    ========           ========



6.       SEGMENT REPORTING
         -----------------

         Stepan Company has three reportable segments: surfactants, polymers and
         specialty products. Financial results of Stepan Company's operating
         segments for the quarters ended March 31, 2001 and 2000, are summarized
         below:



         (Dollars in thousands)                                                            Specialty          Segment
                                                         Surfactants        Polymers        Products           Totals
                                                         -----------        --------        --------          -------
                                                                                                  
         For the quarter ended March 31, 2001
         ------------------------------------
         Net Sales                                        $ 140,378          $30,833         $5,646           $176,857
         Operating income                                     9,916            3,922            980             14,818

         For the quarter ended March 31, 2000
         ------------------------------------
         Net Sales                                        $ 139,168          $31,586         $4,234           $174,988
         Operating income                                    11,786            4,415           (198)            16,003


         Below are reconciliations of segment operating income to consolidated
         income before income taxes:



         (Dollars in thousands)                                                      Three Months Ended March 31
                                                                                    ---------------------------
                                                                                        2001                  2000
                                                                                        ----                  ----
                                                                                                   
         Operating income segment totals                                           $  14,818             $  16,003
         Unallocated corporate expenses (a)                                           (6,989)               (7,003)
         Interest expense                                                             (1,956)               (2,051)
         Income from equity in joint ventures                                            127                    54
                                                                                   ---------             ---------
              Consolidated income before income taxes                              $   6,000             $   7,003
                                                                                   =========             =========

         (a)  Includes corporate administrative and corporate manufacturing
              expenses which are not included in segment operating income and
              not used to evaluate segment performance.


7.       NEW ACCOUNTING STANDARDS
         ------------------------

         In June 1998, the Financial Accounting Standards Board (FASB) issued
         Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
         for Derivative Instruments and Hedging Activities", effective for
         fiscal years beginning after June 15, 1999. In June 1999, the FASB
         issued SFAS No. 137, which deferred the effective date to fiscal years
         beginning after June 15, 2000. The new standard establishes accounting
         and reporting requirements for derivative instruments, including
         certain derivative instruments embedded in other contracts, and for
         hedging activities. Such instruments are to be recognized on the
         balance sheet as either an asset or a liability measured at fair value.
         Changes in fair value must be recognized currently in earnings or in
         other comprehensive income if specific hedge criteria are met. Special
         accounting for qualifying hedges allows a derivative instrument's gains
         and losses to offset related results on the hedged item in the
         statement of income, to the extent effective. If a transaction is
         designated to receive hedge accounting, the company must establish at
         the inception of the hedge the method it


         will use for assessing the effectiveness of the hedge and the
         measurement approach for determining the ineffective aspect of the
         hedge. At December 31, 2000, and March 31, 2001, the company held no
         derivative instruments that fell under the accounting rules of SFAS No.
         133. Therefore, the adoption of SFAS No. 133 on January 1, 2001, had no
         effect on the company's consolidated results of operations or financial
         position. In January 2001, the Emerging Issues Task Force (EITF),
         issued EITF Issue No. 00-22 "Accounting for `Points' and Certain Other
         Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free
         Products or Services to Be Delivered in the Future." EITF Issue No. 00-
         22 provides guidance regarding timing of recognition and income
         statement classification of costs incurred in connection with offers of
         volume-based sales incentives that are provided to customers at a
         future date upon reaching certain volume purchase levels. This guidance
         requires certain volume rebate offers delivered subsequent to the
         related transactions in which they are earned, be recognized when
         incurred and reported as a reduction of revenue in the statement of
         operations. The effective date of EITF No. 00-22 is the first quarter
         ending after February 15, 2001. The company's accounting policies are
         currently consistent with the guidance provided in this EITF;
         therefore, this standard does not have an impact on the company's
         statements of income or financial position.

8.       RECLASSIFICATIONS

         Certain amounts in the 2000 financial statements have been reclassified
         to conform to the 2001 presentation.


                                STEPAN COMPANY
                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

The following is management's discussion and analysis of certain significant
factors which have affected the company's financial condition and results of
operations during the interim period included in the accompanying condensed
consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

For the three months ended March 31, 2001, net cash from operations was a use of
$0.6 million compared to a source of $2.8 million for the same period in 2000.
Working capital totaled to a use of $15.4 million compared to a use of $10.9
million for the same period last year. Accounts receivable increased by $10.1
million compared to $0.8 million in 2000 mainly due to higher seasonal sales
increases this year. Inventories were down by $7.5 million for the current year
period compared to a decrease of $0.3 million last year. Accounts payable and
accrued liabilities decreased by $11.9 million compared to last year's decrease
of $9.8 million.

Capital spending totaled $5.2 million for the first three months of 2001
compared to $5.4 million for the same period in 2000. Total year capital
spending for 2001 is projected to be higher than the $28.4 million recorded in
2000.

Since December 31, 2000, consolidated debt has increased by $8.5 million, to
$114.6 million. As of March 31, 2001, the ratio of long-term debt to long-term
debt plus shareholders' equity was 40.2 percent compared to 38.5 percent last
year-end.

The company maintains contractual relationships with its domestic banks that
provide for revolving credit of up to $60 million, which may be drawn upon as
needed for general corporate purposes. The company also meets short-term
liquidity requirements through uncommitted domestic bank lines of credit. The
company's foreign subsidiaries maintain committed and uncommitted bank lines of
credit in their respective countries to meet working capital requirements as
well as to fund capital expenditure programs and acquisitions.

The company anticipates that cash from operations and from committed credit
facilities will be sufficient to fund anticipated capital expenditures,
dividends and other planned financial commitments for the foreseeable future.
Any substantial acquisitions would require additional funding.

There have been no material changes in the company's market risks since December
31, 2000.


RESULTS OF OPERATIONS
- ---------------------

Three Months Ended March 31, 2001 and 2000
- ------------------------------------------

Net income for the first quarter ended March 31, 2001, was $3.6 million, or
$0.36 per share diluted, down 15 percent from $4.3 million, or $0.41 per share
diluted, reported for the same quarter a year ago. Net sales increased one
percent to $176.9 million in the first quarter of 2001 from $175.0 million
reported for the first quarter of 2000. Net sales by segment were:



         (Dollars in thousands)                               Three Months
                                                             Ended March 31
                                             -----------------------------------------------
                                                    2001            2000        % Change
                                                    ----            ----        --------
                                                                       
         Net Sales:
             Surfactants                        $140,378        $139,168             +1%
             Polymers                             30,833          31,586             -2%
             Specialty Products                    5,646           4,234            +33%
                                                --------        --------
                  Total                         $176,857        $174,988             +1%
                                                ========        ========


Surfactants net sales increased one percent between years. Domestic operations,
which accounted for 77 percent of total surfactant revenues, reported a $0.8
million, or one percent, increase in net sales from year to year. Sales volume
increased four percent, which more than offset a three percent decline in
average selling prices. Sales volume increased due to improvement in the
company's personal care business. Average selling prices fell due to product
mix. Net sales for foreign surfactants operations increased $0.4 million, or one
percent, despite a one percent decline in sales volume. The company's Colombian
and European operations accounted for the foreign net sales improvement. Higher
sales volume drove Colombia's increase, while Europe benefited from higher
average selling prices. Mexican operations reported a 35 percent drop in net
sales due primarily to a 32 percent decline in sales volume.

Surfactants gross profit declined nine percent to $19.2 million in 2001 from
$21.1 million a year ago. Domestic operations reported a $1.5 million, or nine
percent, decline in gross profit due to a drop in average margins. The decrease
in average margins was mainly due to higher utility costs and weaker sales mix.
Gross profit for foreign operations declined $0.4 million, or eight percent,
between years. The previously noted drop in sales volume coupled with a decrease
in average margins led to the decline. Mexican operations contributed most to
the decline offsetting gains achieved by European and South American operations.

Polymers net sales decreased two percent from $31.6 million in the first quarter
of 2000 to $30.8 million in the first quarter of 2001. The decline was due to a
12 percent reduction in sales volume which more than offset an 11 percent
increase in average selling prices. Phthalic anhydride (PA) accounted for most
of the decline. PA's net sales decreased 21 percent from $10.5 million in 2000
to $8.3 million in 2001. Lower sales volume accounted for the decrease and more
than offset a ten percent rise in average selling prices. Higher raw material
costs, which were passed on to customers, led to the average selling price
increase. Net sales for global polyurethane polyols rose four percent from $16.5
million in the first quarter of 2000 to $17.2


million for the same period in 2001. Increased domestic and European sales
accounted for the improvement. Domestic net sales reflected higher average
selling prices, partially offset by lower sales volume. European net sales
reflected increased sales volume, partially offset by lower average selling
prices. Total polyurethane polyols sales volume remained flat between years.
Polyurethane systems reported a $0.7 million, or 16 percent, increase in net
sales between quarters. A seven percent rise in sales volume coupled with an
eight percent increase in average selling prices led to the gain in revenue.

Polymers gross profit fell $0.4 million, or seven percent, to $5.5 million in
the first quarter of 2001 from $5.9 million a year ago. PA's gross profit
dropped $0.9 million, or 71 percent, from quarter to quarter. The decline was
due to decreased average margins and sales volume. Higher unit overhead costs
resulting from decreased production volume led to the lower margins.
Polyurethane polyols gross profit increased eight percent, or $0.3 million, from
$4.2 million in 2000 to $4.5 million in 2001. Improved average domestic margins,
offset somewhat by lower average European margins, led to the increase. Earnings
for polyurethane systems rose $0.2 million, or 20 percent, from $1.1 million in
the first quarter of 2000 to $1.3 million in the same period of 2001. The
increase was due to higher sales volume and improved average margins.

Specialty products reported $5.6 million in net sales in the first quarter of
2001 compared to $4.2 million reported a year ago. The increase was due to
improved sales volume and higher average selling prices. The prior year quarter
volume was disrupted by post year 2000 inventory adjustments. Gross profit
increased from $0.1 million in the first quarter of 2000 to $1.2 million in the
first quarter of 2001. The rise was primarily due to higher sales volume of
higher margin products.

Operating expenses remained almost unchanged between quarters. Interest expense
declined five percent due to lower average debt levels and improving interest
rates.

ENVIRONMENTAL AND LEGAL MATTERS
- -------------------------------

The company is subject to extensive federal, state and local environmental laws
and regulations. 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 could 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 quarter of 2001,
company expenditures for capital projects related to the environment were $0.3
million and should approximate $1.0 million to $1.4 million for the full year
2001. These projects are capitalized and typically depreciated over 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 our manufacturing locations were $1.8 million for the first three
months of 2001. While difficult to project, it is not anticipated that these
recurring expenses will increase significantly in the future.


The company has been named by the government as a potentially responsible party
at 17 waste disposal sites where cleanup costs have been or may be incurred
under the federal Comprehensive Environmental Response, Compensation and
Liability Act and similar state 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 may incur with
respect to these sites. The company has estimated a range of possible
environmental and legal losses from $7.3 million to $34.5 million at March 31,
2001. The company's reserve at March 31, 2001 and December 31, 2000 were $16.8
and $16.6 million, respectively. During the first three months of 2001,
expenditures related to legal and environmental matters approximated $0.4
million. For certain sites, estimates cannot be made of the total costs of
compliance or the company's share of such costs; accordingly, the company is
unable to predict the effect thereof on future results of operations. In the
event of one or more adverse determinations in any annual or interim period, the
impact on results of operations for those periods could be material. However,
based upon the company's present belief as to its relative involvement at these
sites, other viable entities' responsibilities for cleanup and the extended
period over which any costs would be incurred, the company believes that these
matters will not have a material effect on the company's financial position.
Certain of these matters are discussed in Item 3, Legal Proceedings, in the 2000
Form 10-K Annual Report, and in other filings of the company with the Securities
and Exchange Commission, which are available upon request from the company. See
Footnote 3, Contingencies, in Notes to Condensed Consolidated Financial
Statements, and Item 1, Legal Proceedings, in this Form 10-Q for a summary of
the environmental proceedings related to the company's Maywood, New Jersey, and
Ewan and D'Imperio environmental sites.

OTHER
- -----

Except for the historical information contained herein, the matters discussed in
this document are forward looking statements that involve risks and
uncertainties. The results achieved this quarter are not necessarily an
indication of future prospects for the company. Actual results in future
quarters may differ materially. Potential risks and uncertainties include, among
others, fluctuations in the volume and timing of product orders, changes in
demand for the company's products, changes in technology, continued competitive
pressures in the marketplace, outcome of environmental contingencies,
availability of raw materials, foreign currency fluctuations and the general
economic conditions.


Part II                         OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 1 - Legal Proceedings

As reported previously, the company's site in Maywood, New Jersey and property
formerly owned by the company adjacent to its current site, were listed on the
National Priorities List in September 1993 pursuant to the provisions of the
Comprehensive Environmental Response Compensation and Liabilities Act (CERCLA)
because of certain alleged chemical contamination. Pursuant to an Administrative
Order on Consent entered into between the United States Environmental Protection
Agency (USEPA) and the company for property formerly owned by the company, and
the issuance of an order by USEPA to the company for property currently owned by
the company, the company completed a Remedial Investigation Feasibility Study
(RI/FS) in 1994. In addition, the company submitted a Feasibility Study Addendum
to USEPA in October 2000. The company has been awaiting the issuance of a Record
of Decision (ROD) from USEPA which would relate to both the currently owned and
formerly owned company property and would recommend the type of remediation
required on each property. The company anticipates that USEPA will issue the
proposed ROD sometime during fiscal year 2001 or 2002 with a public comment
period to follow. The final ROD will be issued sometime after the public comment
period.

In 1985, the company entered into a Cooperative Agreement with the United States
of America represented by the Department of Energy (Agreement). Pursuant to this
Agreement, the Department of Energy (DOE) took title to radiological
contaminated materials and was to remediate, at its expense, all radiological
waste on the company's property in Maywood, New Jersey. The Maywood property
(and portions of the surrounding area) was being remediated by the DOE under the
Formerly Utilized Sites Remedial Action Program, a federal program under which
the U.S. Government undertook to remediate properties which were used to process
radiological material for the U.S. Government. In 1997, responsibility for this
clean-up was transferred to the United States Army Corps of Engineers (USACE).
On January 29, 1999, the company received a copy of a USACE Report to Congress
dated January 1998 in which the USACE expressed their intention to evaluate,
with the USEPA, whether the company and/or other parties might be responsible
for cost recovery or contribution claims related to the Maywood site. Subsequent
to the issuance of that report, the USACE advised the company that it had
requested legal advice from the Department of Justice as to the impact of the
Agreement.

By letter dated July 28, 2000, the Department of Justice advised the company
that the USACE and USEPA had referred to the Justice Department claims against
the company for response costs incurred or to be incurred by the USACE, USEPA
and the DOE in connection with the Maywood site and the Justice Department
stated that the United States is entitled to recovery of its response costs from
the company under CERCLA. The letter referred to both radiological and non-
radiological hazardous waste at the Maywood site and stated that the United
States has incurred unreimbursed response costs to date of $138 million. Costs
associated with radiological waste at the Maywood site, which the company
believes represent all but a small portion of the amount referred to in the
Justice Department letter, could be expected to aggregate substantially in
excess of that amount. In the letter, the Justice Department invited the company
to discuss settlement of the matter in order to avoid the need for litigation.
The company believes that its


liability, if any, for such costs has been resolved by the aforesaid Agreement.
Despite the fact that the company continues to believe that it has no liability
to the United States for such costs, discussions with the Justice Department are
currently ongoing to attempt to resolve this matter.

The company believes it has adequate reserves for claims associated with the
Maywood site. However, depending on the results of the ongoing discussions
regarding the Maywood site, the final cost of the remediation could differ from
the current estimates.

As reported previously, the company has been named as a potentially responsible
party (PRP) in the case USEPA v. Jerome Lightman (92 CV 4710 D. N. J.) which
involves the Ewan and D'Imperio Superfund Sites located in New Jersey. Trial on
the issue of the company's liability at these sites was completed in March 2000.
The company is awaiting a decision from the court. If the company is found
liable at either site, a second trial as to the company's allocated share of
clean-up costs at these sites will likely be held in late 2001 or 2002. The
company believes it has adequate defenses to the issue of liability. In the
event of an unfavorable outcome related to the issue of liability, the company
believes it has adequate reserves. On a related matter, the company has filed an
appeal to the United States Third Circuit Court of Appeals objecting to the
lodging of a partial consent decree in favor of the United States Government in
this action. Under the partial consent decree, the government recovered past
costs at the site from all PRPs including the company. The company paid its
assessed share but by objecting to the partial consent decree, the company is
seeking to recover back the sums it paid.

Regarding the D'Imperio Superfund Site, USEPA has indicated it will seek penalty
claims against the company based on the company's alleged noncompliance with the
modified Unilateral Administrative Order. The company is currently negotiating
with USEPA to settle its proposed penalty against the company. In addition, the
company also received notice from the New Jersey Department of Environmental
Protection (NJDEP) dated March 21, 2001, that NJDEP has indicated it will pursue
cost recovery against the alleged responsible parties, including the company.
The NJDEP's claims include costs related to remediation of the D'Imperio
Superfund Site in the amount of $434,405.53 and alleged natural resource damages
in the amount of $529,584.00 (as of November 3, 2000). The NJDEP has proposed
settling such claims, with the company being responsible for a portion of these
costs. The company is currently investigating its options with respect to both
of these potential actions but does not believe that such settlements, if any,
will have a material impact on the financial condition of the company.

As reported previously, the company received a Section 104(e) Request for
Information from USEPA dated March 21, 2000, regarding the Lightman Drum Company
Site located in Winslow Township, New Jersey. The company responded to this
request on May 18, 2000. In addition, the company received a Notice of Potential
Liability and Request to Perform RI/FS dated June 30, 2000, from USEPA. The
company has decided that it will participate in the performance of the RI/FS.
However, based on the current information known regarding this site, the company
is unable to predict what its liability, if any, will be for this site.


Item 4 - Submission of Matters to a Vote of Security Holders

         (A)      The company's 2001 Annual Meeting of Stockholders was held on
                  May 1, 2001.

         (B)      At the annual meeting of the company's shareholders on May 1,
                  2001, shareholders elected Robert G. Potter and F. Quinn
                  Stepan as Directors of the company, all for three-year terms.

                                                  For             Withheld
                                                  ---             --------
                     Robert G. Potter          8,661,042           103,140
                     F. Quinn Stepan           8,554,617           209,565


         (C)      A majority of the outstanding shares voted to ratify the
                  appointment of Arthur Andersen LLP as independent auditors for
                  the company for 2001.

                                      8,721,065     For
                                         33,943     Against
                                          9,174     Abstentions

Item 6 - Exhibits and Reports on Form 8-K

         (A)      Exhibits

                  None


         (B)      Reports on Form 8-K

                  None


                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                      STEPAN COMPANY



                                      /s/ Walter J. Klein

                                      Walter J. Klein
                                      Vice President - Finance
                                      Principal Financial and Accounting Officer

Date: May 4, 2001