NORTHFIELD, Ill., Oct. 20 /PRNewswire-FirstCall/ -- Stepan Company
(NYSE: SCL) today reported record third quarter and year-to-date
results for the period ended September 30, 2009. -- Net income rose
15 percent to $19.5 million for the quarter and increased 53
percent to $54.3 million for the nine month period. -- Net income,
excluding deferred compensation plan expense and gains on assets
sold in the prior year, rose 200 percent for the quarter and 99
percent for the nine month period (see Table IV). -- The dividend
was increased by 9.1 percent to an annual rate of $0.96 per common
share. This marks the forty-second consecutive annual dividend
increase. -- Strong free cash flow from operations reduced debt,
net of cash, from $126.3 million at December 31, 2008, to $37.4
million at September 30, 2009. SUMMARY Three Months Ended September
30 --------------------------- ($in thousands) 2009 2008 % Change
---- ---- -------- Net Sales $326,225 $432,947 - 25 Net Income
19,545 17,000 + 15 Net Income Excluding Deferred Compensation*
22,201 18,712 + 19 Earnings per Diluted Share $1.80 $1.59 + 13
Earnings per Diluted Share Excluding Deferred Compensation $2.04
$1.75 + 17 Nine Months Ended September 30
----------------------------- ($in thousands) 2009 2008 % Change
---- ---- -------- Net Sales $965,567 $1,234,797 - 22 Net Income
54,282 35,508 + 53 Net Income Excluding Deferred Compensation*
56,558 39,788 + 42 Earnings per Diluted Share $5.06 $3.39 + 49
Earnings per Diluted Share Excluding Deferred Compensation $5.28
$3.80 + 39 * See Table II for a discussion of deferred compensation
plan accounting. THIRD QUARTER RESULTS Net income for the quarter
was $19.5 million, or $1.80 per diluted share, compared to $17.0
million, or $1.59 per diluted share, a year ago. Prior year net
income included $11.3 million, or $1.06 per diluted share, of after
tax gains on the sale of a product line and some land. The strong
quarterly performance was attributable to lower commodity raw
material costs, successful cost control initiatives and a desirable
product mix for laundry and personal care products that have
performed well during this economic downturn. Gross profit
increased by 61 percent to $68.9 million. -- Surfactant gross
profit grew by 41 percent to $45.3 million, on a six percent
decline in volume. -- Polymer gross profit rose by 120 percent to
$19.5 million, despite a 13 percent decline in volume. Three Months
Ended September 30 ----------------------------- ($in thousands)
2009 2008 % Change ---- ---- -------- Net Sales Surfactants
$240,083 $318,388 - 25 Polymers 75,355 103,518 - 27 Specialty
Products 10,787 11,041 - 2 ------ ------ Total Net Sales $326,225
$432,947 - 25 ======== ======== Nine Months Ended September 30
--------------------------- ($in thousands) 2009 2008 % Change ----
---- -------- Net Sales Surfactants $738,197 $916,724 - 19 Polymers
195,198 287,442 - 32 Specialty Products 32,172 30,631 + 5 ------
------ Total Net Sales $965,567 $1,234,797 - 22 ======== ==========
Net sales decreased 25 percent for the quarter and 22 percent
year-to-date, attributable to the following: NET SALES PERCENTAGE
CHANGES (DECREASE) -------------------------------------------
Three Months Ended Nine Months Ended September 30 September 30
------------------ ----------------- Volume (7) (10) Selling Price
(15) (7) Foreign Translation (3) (5) --- --- Total (25) (22) ====
==== Surfactant gross profit increased $13.1 million, or 41
percent, for the quarter and $32.8 million, or 33 percent for the
nine months. The improvement continued to be based on lower
commodity raw material cost, purchasing led cost reduction
initiatives and freight and logistical savings. Surfactant sales
volume declined six percent for the quarter and seven percent for
the year-to-date period. Most of the volume decline was
attributable to lower biodiesel sales, as the economics of
biodiesel remain weak due to high feedstock costs and lower diesel
selling prices versus prior years. The economic downturn has had
minimal impact on our largest surfactant market, consumer laundry
and personal care, where volumes were slightly ahead of last year.
Polymer segment gross profit grew by $10.7 million, or 120 percent.
Polyol products generated most of the improvement on lower raw
material costs and cost reduction initiatives. Sales volume
declined 13 percent, primarily for polyol used in commercial flat
roof insulation. New construction and replacement of roofs have
both been hit by the economic downturn. Specialty products gross
profit grew by $2.7 million, or 122 percent, on margin recovery due
to lower raw material costs and improved product mix. Specialty
products represents three percent of Company sales. OPERATING
EXPENSES Three Months Ended September 30
--------------------------- ($in thousands) 2009 2008 % Change ----
---- -------- Marketing $10,179 $11,290 - 10 Administrative -
General 11,175 10,531 + 6 Administrative -Deferred Compensation
Obligations 5,274 1,245 NM Research, development and technical
service 8,650 9,293 - 7 ----- ----- Total $35,278 $32,359 + 9
======= ======= Nine Months Ended September 30
--------------------------- ($in thousands) 2009 2008 % Change ----
---- -------- Marketing $29,242 $31,470 - 7 Administrative -
General 31,538 31,331 + 1 Administrative - Deferred Compensation
Obligations 5,145 4,385 + 17 Research, development and technical
service 26,349 26,567 - 1 ------ ------ Total $92,274 $93,753 - 2
======= ======= -- Excluding deferred compensation expense,
operating expenses declined $1.1 million, or four percent, for the
quarter, and $2.2 million, or three percent, for the nine month
period. -- Foreign currency translation favorably reduced operating
expense by $0.7 million and $3.3 million for the quarter and
year-to-date period, respectively. -- Cost containment efforts on
discretionary spending items offset increases in salary and
incentive based compensation costs. OTHER INCOME AND EXPENSE
Interest expense declined $0.9 million (38 percent) for the quarter
and $2.4 million (33 percent) for the nine months due to lower
average debt levels. The quarterly loss from equity investments in
joint ventures increased $1.0 million (75 percent) due to tax
provisions at the Philippine joint venture and start-up costs of
our TIORCO enhanced oil recovery joint venture with Nalco. Other
income improved by $1.3 million due to income on assets held for
our deferred compensation plan. BALANCE SHEET The Company's net
debt levels declined by $28.3 million for the quarter and $88.9
million for the first nine months: ($in millions) Net Debt 9/30/09
6/30/09 12/31/08 ------- ------- -------- Total Debt $110.3 $121.5
$143.0 Cash 72.9 55.8 16.7 ---- ---- ---- Net Debt $37.4 $65.7
$126.3 ===== ===== ====== The lower net debt levels were
attributable to improved earnings coupled with lower working
capital requirements. Working capital, excluding cash, declined due
to lower raw material costs brought about by the decline in crude
and natural oil prices. PROVISION FOR INCOME TAXES The effective
tax rate rose to 35.6 percent for the quarter, from 30.2 percent a
year ago. The year-to-date effective tax rate was 35.6 percent
compared to the year ago rate of 31.3 percent. The higher effective
rate was due to a higher mix of income generated in the U.S.,
taxable at higher rates than foreign earned income. DIVIDEND
INCREASE On October 19, 2009, the Board of Directors of Stepan
Company declared a 9.1 percent increase in the Company's quarterly
cash dividend on its common stock to $0.24 per share. The quarterly
dividend is payable on December 15, 2009, to stockholders of record
on November 30, 2009. The increase brings the annual dividend rate
to $0.96 per share, and marks the forty-second consecutive annual
dividend increase. The Board of Directors today also declared a
quarterly cash dividend on its 5.5 percent convertible preferred
stock, at the quarterly dividend rate of $0.34375 per share, or at
the annual rate of $1.375 per share. The dividend is payable on
November 30, 2009, to preferred stockholders of record on November
13, 2009. The Board of Directors today also declared a quarterly
cash dividend on its 5.5 percent convertible preferred stock, at
the quarterly dividend rate of $0.34375 per share, or at the annual
rate of $1.375 per share. The dividend is payable on February 26,
2010, to preferred stockholders of record on February 15, 2010.
OUTLOOK "Despite the economy, we began 2009 with the intent to
drive results within each of our three business units and improve
our performance. In each of the first three quarters, we delivered
record net income as we benefitted from the relative stability of
our large laundry and personal care markets for our surfactant
products, falling commodity prices within all three business units
and our ability to contain costs," said F. Quinn Stepan, Jr.,
President and Chief Executive Officer. "In the fourth quarter,
earnings will be lower than the previous three quarters due to
seasonal volume declines and acceleration of planned maintenance
items including a planned 2010 shutdown of our phthalic anhydride
(PA) plant in order to complete the work while the PA market
remains slow. We are on track to deliver a record year in 2009 and
are now focused on driving business growth in 2010." CONFERENCE
CALL Stepan Company will host a conference call to discuss the
third quarter results at 2:00 p.m. Eastern Daylight Time on October
20, 2009. To listen to a live webcast of this call, please go to
our Internet website at: http://www.stepan.com/, click on investor
relations, next click on conference calls and follow the directions
on the screen. Stepan Company, headquartered in Northfield,
Illinois, is a leading producer of specialty and intermediate
chemicals used in household, industrial, personal care,
agricultural, food and insulation related products. The common and
the convertible preferred stocks are traded on the New York and
Chicago Stock Exchanges under the symbols SCL and SCLPR. * * * * *
table follows Except for historical information, all other
information in this news release consists of forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ
materially from those projected, anticipated or implied. The most
significant of these uncertainties are described in Stepan
Company's Form 10-K, Form 8-K and Form 10-Q reports and exhibits to
those reports, and include (but are not limited to), prospects for
our foreign operations, foreign currency fluctuations, certain
global and regional economic conditions, the probability of future
acquisitions and the uncertainties related to the integration of
acquired businesses, the probability of new products, the loss of
one or more key customer or supplier relationships, the costs and
other effects of governmental regulation and legal and
administrative proceedings, and general economic conditions. These
forward-looking statements are made only as of the date hereof, and
Stepan Company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events or otherwise. Table I STEPAN COMPANY Statements of
Income For the Three and Nine Months Ended September 30, 2009 and
2008 (Unaudited - 000's Omitted) Three Months Ended September 30
----------------------------- 2009 2008 % Change ---- ---- --------
Net Sales $326,225 $432,947 - 25 Cost of Sales 257,294 390,162 - 34
------- ------- Gross Profit 68,931 42,785 + 61 Operating Expenses:
Marketing 10,179 11,290 - 10 Administrative 16,449 11,776 + 40
Research, Development and Technical Services 8,650 9,293 - 7 Sale
of Product Line - (9,929) NM Sale of Land - (8,469) NM ---- -------
35,278 13,961 + 153 Operating Income 33,653 28,824 + 17 Other
Income (Expense): Interest, Net (1,508) (2,447) - 38 Loss from
Equity in Joint Ventures (2,398) (1,368) + 75 Other, Net 684 (599)
NM --- ----- (3,222) (4,414) - 27 Income Before Provision for
Income Taxes 30,431 24,410 + 25 Provision for Income Taxes 10,843
7,379 + 47 ------ ----- Net Income 19,588 17,031 + 15 Less: Net
Income Attributable to the Noncontrolling Interest (43) (31) + 39
---- ---- Net Income Attributable to Stepan Company $19,545 $17,000
+ 15 ======= ======= Net Income Per Common Share Attributable to
Stepan Company Basic $1.96 $1.75 + 12 ===== ===== Diluted $1.80
$1.59 + 13 ===== ===== Shares Used to Compute Net Income Per Common
Share Attributable to Stepan Company Basic 9,880 9,628 + 3 =====
===== Diluted 10,871 10,694 + 2 ====== ====== Nine Months Ended
September 30 ---------------------------- 2009 2008 % Change ----
---- -------- Net Sales $965,567 $1,234,797 - 22 Cost of Sales
782,283 1,096,153 - 29 ------- --------- Gross Profit 183,284
138,644 + 32 Operating Expenses: Marketing 29,242 31,470 - 7
Administrative 36,683 35,716 + 3 Research, Development and
Technical Services 26,349 26,567 - 1 Sale of Product Line - (9,929)
NM Sale of Land - (8,469) NM ---- ------- 92,274 75,355 + 22
Operating Income 91,010 63,289 + 44 Other Income (Expense):
Interest, Net (4,935) (7,367) - 33 Loss from Equity in Joint
Ventures (3,491) (2,245) + 56 Other, Net 1,725 (1,960) NM -----
------- (6,701) (11,572) - 42 Income Before Provision for Income
Taxes 84,309 51,717 + 63 Provision for Income Taxes 30,003 16,205 +
85 Net Income 54,306 35,512 + 53 Less: Net Income Attributable to
the Noncontrolling Interest (24) (4) NM ---- --- Net Income
Attributable to Stepan Company $54,282 $35,508 + 53 ======= =======
Net Income Per Common Share Attributable to Stepan Company Basic
$5.47 $3.67 + 49 ===== ===== Diluted $5.06 $3.39 + 49 ===== =====
Shares Used to Compute Net Income Per Common Share Attributable to
Stepan Company Basic 9,815 9,521 + 3 ===== ===== Diluted 10,718
10,468 + 2 ====== ====== Table II Deferred Compensation Plan The
full effect of the deferred compensation plan on quarterly pretax
income was $4.3 million of expense versus expense of $2.8 million
last year. The accounting for the deferred compensation plan
results in income when the price of Stepan Company common stock or
mutual funds held in the plan fall and expense when they rise. The
Company also recognizes the change in value of mutual funds as
investment income or loss. The quarter end market prices of Stepan
Company common stock are as follows: 2009 ------------------------
9/30 6/30 3/31 ---- ---- ---- Stepan Company (SCL) $60.08 $44.16
$27.30 2008 ----------------------------------- 12/31 9/30 6/30
3/31 ----- ---- ---- ---- Stepan Company (SCL) $46.99 $54.57 $45.62
$38.23 The deferred compensation expense income statement impact is
summarized below: Three Months Ended Nine Months Ended September 30
September 30 ------------------ ------------------ ($in thousands)
2009 2008 2009 2008 ---- ---- ---- ---- Deferred Compensation
Administrative (Expense) Income $(5,274) $(1,245) $(5,145) $(4,385)
Other, net - Mutual Fund Gain (Loss) 990 (1,517) 1,473 (2,518) ---
------- ----- ------- Total Pretax $(4,284) $(2,762) $(3,672)
$(6,903) ======== ======== ======== ======== Total After Tax
$(2,656) $(1,712) $(2,276) $(4,280) ======== ======== ========
======== Reconciliation of non-GAAP net income: Three Months Ended
Nine Months Ended September 30 September 30 ------------------
------------------ ($in thousands) 2009 2008 2009 2008 ---- ----
---- ---- Net income excluding deferred compensation $22,201
$18,712 $56,558 $39,788 Deferred compensation plan (expense) income
(2,656) (1,712) (2,276) (4,280) ------- ------- ------- ------- Net
income as reported $19,545 $17,000 $54,282 $35,508 ======= =======
======= ======= Reconciliation of non-GAAP EPS: Three Months Ended
Nine Months Ended September 30 September 30 ------------------
------------------ 2009 2008 2009 2008 ---- ---- ---- ---- Earnings
per diluted share excluding deferred compensation $2.04 $1.75 $5.28
$3.80 Deferred compensation plan (expense) income (0.24) (0.16)
(0.22) (0.41) ------ ------ ------ ------- Earnings per diluted
share $1.80 $1.59 $5.06 $3.39 ===== ===== ===== ===== The Company
believes that certain non-GAAP measures, when presented in
conjunction with comparable GAAP (Generally Accepted Accounting
Principles) measures, are useful because that information is an
appropriate measure for evaluating the Company's operating
performance. 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, neither a substitute
for, or superior to, measures of financial performance prepared in
accordance with GAAP. Table III Effects of Foreign Currency
Translation 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). For the three
and nine month periods ending September 30, 2009, the U.S. dollar
strengthened against nearly all the foreign currencies in the
locations where the Company does business, when compared to the
exchange rates for the three and nine month periods ending
September 30, 2008. Consequently, reported net sales, expense and
income amounts for the three and nine month periods ending
September 30, 2009, were lower than they would have been had the
foreign currency exchange rates remained constant with the rates
for the same periods of 2008. Below is a table that presents the
impact that foreign currency translation had on the changes in
consolidated net sales and various income line items for the three
and nine month periods ending September 30, 2009: ($in millions)
Inc (Dec) Due Three Months Increase to Foreign Ended September 30
(Decrease) Translation ------------------ ----------
--------------- 2009 2008 ---- ---- Net Sales 326.2 432.9 (106.7)
(12.5) Gross Profit 68.9 42.8 26.1 (1.8) Operating Income 33.7 28.8
4.9 (1.2) Pretax Income 30.4 24.4 6.0 (1.0) ($in millions) Inc
(Dec) Due Nine Months Increase to Foreign Ended September 30
(Decrease) Translation ------------------ ---------- --------------
2009 2008 ---- ---- Net Sales 965.6 1,234.8 (269.2) (61.6) Gross
Profit 183.3 138.6 44.7 (9.5) Operating Income 91.0 63.3 27.7 (6.2)
Pretax Income 84.3 51.7 32.6 (6.3) Table IV Reconciliation of
Non-GAAP Earnings Measure Three Months Ended September 30
------------------------ ($in millions) 2009 2008 % Change ----
---- -------- Net Income excluding deferred Compensation plan
expenses and gains on asset sales $22.2 $7.4 + 200 Deferred
Compensation Expenses (3.3) (0.8) Deferred Compensation Investment
Income 0.6 (0.9) Gain on Product Line Sale - 6.1 Gain on Land Sale
- 5.2 ---- --- Net Income as Reported $19.5 $17.0 + 15 ===== =====
Nine Months Ended September 30 ------------------------ ($in
millions) 2009 2008 % Change ---- ---- -------- Net Income
excluding deferred Compensation plan expenses and gains on asset
sales $56.6 $28.4 + 99 Deferred Compensation Expenses (3.2) (2.7)
Deferred Compensation Investment Income 0.9 (1.5) Gain on Product
Line Sale - 6.1 Gain on Land Sale - 5.2 ---- --- Net Income as
Reported $54.3 $35.5 + 53 ===== ===== The Company believes that
certain non-GAAP measures, when presented in conjunction with
comparable GAAP (Generally Accepted Accounting Principles)
measures, are useful because that information is an appropriate
measure for evaluating the Company's operating performance.
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, neither a substitute
for, or superior to, measures of financial performance prepared in
accordance with GAAP. DATASOURCE: Stepan Company CONTACT: James E.
Hurlbutt, +1-847-446-7500 Web Site: http://www.stepan.com/
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