NORTHFIELD, Ill., Oct. 23, 2019 /PRNewswire/ -- Stepan Company
(NYSE: SCL) today reported:
Third Quarter Highlights
- Reported net income was $25.9
million, or $1.11 per diluted
share versus $21.8 million, or
$0.93 per diluted share, in the prior
year. Adjusted net income* was $27.9
million, or $1.20 per diluted
share versus $26.4 million, or
$1.13 per diluted share, in the prior
year.
- Surfactant operating income was $19.7
million versus $28.8 million
in the prior year. This decrease was primarily attributable to an
8% decline in global sales volume. The decline in global sales
volume was mostly due to the Company's exit from its sulfonation
business in Germany in 2018, lower
agricultural demand due to the wet weather in the U.S. farm belt
and lower demand in the U.S. commodity consumer product end
markets. The current quarter was also significantly impacted by
higher inventory-related costs associated with the Company's
internal Asian-U.S. supply chain and the residual impact of the
equipment failure in Ecatepec,
Mexico. The Company's insurance provider has acknowledged
the Ecatepec incident is a covered
event and the Company is pursuing insurance recovery for damaged
equipment, incremental supply chain expenses and business
interruption.
- Polymer operating income was $23.3
million versus $19.3 million
in the prior year. This increase was mostly attributable to higher
volume and improved margins. Global Polymer sales volume increased
3% versus the prior year. Global rigid polyol volume growth of 6%
more than offset lower volume in other end markets.
- Specialty Product operating income was $2.3 million versus $2.7
million in the prior year. This decrease was primarily
attributable to unfavorable order timing differences within our
pharmaceutical business largely offset by improved margins within
our medium chain triglycerides (MCTs) product line.
- The effect of foreign currency translation negatively impacted
net income by $0.4 million, or
$0.02 per diluted share, versus the
prior year.
- The Company increased its quarterly cash dividend in the fourth
quarter of 2019 by $.025 per share, or 10%, marking the 52nd
consecutive year that the Company has increased its cash dividend
to stockholders.
YTD Highlights
- Reported net income was $81.1
million, or $3.48 per diluted
share, versus $87.2 million, or
$3.74 per diluted share, in the prior
year. Adjusted net income* was $93.7
million, or $4.02 per diluted
share, versus $92.2 million, or
$3.95 per diluted share, in the prior
year. Total Company sales volume declined 3% compared to the first
nine months of 2018. Sales volume growth within the Polymer and
Specialty Product segments was offset by a 4% decline in Surfactant
sales volume, or a 2% decline excluding the exit from the
sulfonation business in Germany.
- As disclosed in the first quarter of 2019, the Company elected
to change its method of accounting for U.S. inventories from the
last in, first out (LIFO) basis to the first in, first out (FIFO)
basis. The Company has retrospectively applied this change to its
prior year financial statement comparables and denoted impacted
prior year columns "As Adjusted". The net impact of changing from
the LIFO method to the FIFO method on prior year results was
$0.4 million of additional expense
recognition in the third quarter and $1.3
million of additional income recognition for the first nine
months. The Company will recognize $1.6
million of additional expense for full year 2018.
* Adjusted net income is a non-GAAP measure which
excludes deferred compensation income/expense, cash-settled stock
appreciation rights (SARs), as well as other significant and
infrequent/non-recurring items. See Table II for reconciliations of
non-GAAP adjusted net income and adjusted earnings per diluted
share.
"Despite the challenging current environment, the Company's
quarterly net income and adjusted net income exceeded prior year,
and through nine months, adjusted net income is ahead of last
year's record," said F. Quinn Stepan,
Jr., Chairman, President and Chief Executive Officer.
"For the quarter, Surfactant earnings were down significantly due
to lower commodity volumes in North
America and the slow recovery of our business in
Mexico. The Polymer business had a strong third quarter
driven by global rigid polyol growth. Specialty Products
income was down due to customer order patterns, but is expected to
deliver significant profit growth for the
year."
Financial
Summary
|
|
|
|
|
|
|
Three Months Ended
September
30
|
|
|
Nine Months Ended
September 30
|
|
($ in thousands,
except per share data)
|
2019
|
|
|
2018
As
Adjusted
|
|
|
%
Change
|
|
|
2019
|
|
|
2018
As Adjusted
|
|
|
%
Change
|
|
Net Sales
|
$
|
451,582
|
|
|
$
|
507,997
|
|
|
|
(11)
|
%
|
|
$
|
1,413,755
|
|
|
$
|
1,527,198
|
|
|
|
(7)
|
%
|
Operating Income
(1)
|
$
|
27,966
|
|
|
$
|
27,145
|
|
|
|
3
|
%
|
|
$
|
98,769
|
|
|
$
|
113,814
|
|
|
|
(13)
|
%
|
Net Income
(1)
|
$
|
25,889
|
|
|
$
|
21,754
|
|
|
|
19
|
%
|
|
$
|
81,091
|
|
|
$
|
87,160
|
|
|
|
(7)
|
%
|
Earnings per Diluted
Share (1)
|
$
|
1.11
|
|
|
$
|
0.93
|
|
|
|
19
|
%
|
|
$
|
3.48
|
|
|
$
|
3.74
|
|
|
|
(7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
(1) (2)
|
$
|
27,929
|
|
|
$
|
26,356
|
|
|
|
6
|
%
|
|
$
|
93,695
|
|
|
$
|
92,170
|
|
|
|
2
|
%
|
Adjusted Earnings per
Diluted Share (1)
(2)
|
$
|
1.20
|
|
|
$
|
1.13
|
|
|
|
6
|
%
|
|
$
|
4.02
|
|
|
$
|
3.95
|
|
|
|
2
|
%
|
|
|
(1)
|
The 2018 amounts
for the noted line items have been retrospectively changed from the
amounts originally reported as a result of the Company's first
quarter 2019 change in method of accounting for U.S. inventory
valuation from LIFO to FIFO.
|
(2)
|
See Table II for
reconciliations of non-GAAP adjusted net income and earnings per
diluted share.
|
Summary of Third Quarter Adjusted Net Income
Items
Adjusted net income excludes non-operational deferred
compensation income/expense, cash-settled SARs and other
significant and infrequent or non-recurring items.
- Deferred Compensation: The current year third quarter
includes $1.4 million of after-tax
expense versus $2.6 million of
after-tax expense in the prior year.
- Cash-Settled SARs: These management incentive
instruments provide cash to participants equal to the appreciation
on the price of specified shares of Company stock over a specified
period of time. Because income or expense is recognized merely on
the movement in the price of Company stock it has been excluded,
similar to deferred compensation, to arrive at adjusted net income.
The current year second quarter includes $0.3 million of after-tax expense versus
$0.8 million of after-tax expense in
the prior year.
- Business Restructuring: The current year third quarter
includes $0.3 million of after-tax
decommissioning expense related to the Company's prior year
Canadian plant closure and Germany
sulfonation shutdown versus $1.2
million of after-tax expense in 2018.
Percentage Change in Net Sales
Net sales decreased 11%
in the year-over-year third quarter due to a 6% decline in global
sales volume, lower selling prices mainly attributable to the
pass-through of lower raw material costs, and the unfavorable
impact of foreign currency translation. The lower sales
volume primarily reflects a Surfactant decline of 8% partially
offset by Polymer growth of 3%.
|
|
Three Months Ended
September
30, 2019
|
|
|
Nine Months Ended
September
30, 2019
|
|
Volume
|
|
|
(6)
|
%
|
|
|
(3)
|
%
|
Selling
Price
|
|
|
(4)
|
%
|
|
|
(2)
|
%
|
Foreign
Translation
|
|
|
(1)
|
%
|
|
|
(2)
|
%
|
Total
|
|
|
(11)
|
%
|
|
|
(7)
|
%
|
Reported Segment
Results
|
|
|
|
|
|
|
Three Months Ended
September
30
|
|
|
Nine Months Ended
September 30
|
|
($ in
thousands)
|
|
2019
|
|
|
2018
|
|
|
%
Change
|
|
|
2019
|
|
|
2018
|
|
|
%
Change
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surfactants
|
|
$
|
299,719
|
|
|
$
|
346,884
|
|
|
|
(14)
|
%
|
|
$
|
962,749
|
|
|
$
|
1,062,708
|
|
|
|
(9)
|
%
|
Polymers
|
|
$
|
135,089
|
|
|
$
|
141,646
|
|
|
|
(5)
|
%
|
|
$
|
395,904
|
|
|
$
|
404,446
|
|
|
|
(2)
|
%
|
Specialty
Products
|
|
$
|
16,774
|
|
|
$
|
19,467
|
|
|
|
(14)
|
%
|
|
$
|
55,102
|
|
|
$
|
60,044
|
|
|
|
(8)
|
%
|
Total Net
Sales
|
|
$
|
451,582
|
|
|
$
|
507,997
|
|
|
|
(11)
|
%
|
|
$
|
1,413,755
|
|
|
$
|
1,527,198
|
|
|
|
(7)
|
%
|
|
|
Three Months Ended
September
30
|
|
|
Nine Months Ended
September 30
|
|
($ in thousands,
all amounts pre-tax)
|
|
2019
|
|
|
2018
As Adjusted
|
|
|
%
Change
|
|
|
2019
|
|
|
2018
As Adjusted
|
|
|
%
Change
|
|
Operating Income
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surfactants
|
|
$
|
19,660
|
|
|
$
|
28,824
|
|
|
|
(32)
|
%
|
|
$
|
88,913
|
|
|
$
|
104,370
|
|
|
|
(15)
|
%
|
Polymers
|
|
$
|
23,283
|
|
|
$
|
19,259
|
|
|
|
21
|
%
|
|
$
|
58,148
|
|
|
$
|
56,863
|
|
|
|
2
|
%
|
Specialty
Products
|
|
$
|
2,261
|
|
|
$
|
2,653
|
|
|
|
(15)
|
%
|
|
$
|
11,374
|
|
|
$
|
6,543
|
|
|
|
74
|
%
|
Segment Operating
Income
|
|
$
|
45,204
|
|
|
$
|
50,736
|
|
|
|
(11)
|
%
|
|
$
|
158,435
|
|
|
$
|
167,776
|
|
|
|
(6)
|
%
|
Corporate
Expenses
|
|
$
|
(17,238)
|
|
|
$
|
(23,591)
|
|
|
|
27
|
%
|
|
$
|
(59,666)
|
|
|
$
|
(53,962)
|
|
|
|
(11)
|
%
|
Consolidated
Operating
Income
|
|
$
|
27,966
|
|
|
$
|
27,145
|
|
|
|
3
|
%
|
|
$
|
98,769
|
|
|
$
|
113,814
|
|
|
|
(13)
|
%
|
* The 2018 Segment operating income amounts have been
retrospectively changed from the amounts originally reported as a
result of the Company's first quarter 2019 change in method of
accounting for U.S. inventory valuation from LIFO to FIFO.
Total segment operating income decreased $5.5 million, or 11%, versus the prior year
quarter. Total segment operating income for the first nine months
of 2019 decreased $9.3 million, or
6%, versus the prior year.
- Surfactant net sales were $299.7
million for the quarter, a 14% decrease versus the prior
year. Sales volume decreased 8% mostly due to the Company's exit
from its sulfonation business in Germany in 2018, lower agricultural demand due
to the wet weather in the U.S. farm belt and lower demand in the
global commodity consumer products end markets. Selling prices were
down 4% primarily due to the pass-through of lower raw material
costs. The translation impact of a stronger U.S. dollar decreased
net sales by 2%. Surfactant operating income decreased $9.2 million primarily due to lower sales volume,
higher inventory-related costs associated with the Company's
internal Asian-U.S. supply chain and the residual impact of the
equipment failure in Ecatepec,
Mexico.
- Polymer net sales were $135.1
million for the quarter, down 5% versus the prior year.
Total sales volume increased 3%. Global rigid polyol volume growth
of 6% was partially offset by lower phthalic anhydride and
specialty polyol volumes. Selling prices declined 6% and the
translation impact of a stronger U.S. dollar negatively impacted
net sales by 2%. Polymer operating income increased $4.0 million versus the prior year quarter
primarily due to higher sales volume and a more favorable product
mix.
- Specialty Product net sales were $16.8
million for the quarter, a 14% decrease versus the prior
year. Sales volume declined 2% for the quarter. Operating income
decreased $0.4 million versus the
prior year quarter primarily due to unfavorable order timing
differences within our pharmaceutical business, partially offset by
improved margins within our medium chain triglycerides (MCTs)
product line.
Corporate
Expenses
|
|
|
Three Months Ended
September
30
|
|
|
Nine Months Ended
September 30
|
|
($ in
thousands)
|
|
2019
|
|
|
2018
|
|
|
%
Change
|
|
|
2019
|
|
|
2018
|
|
|
%
Change
|
|
Total -
Corporate Expenses
|
|
$
|
17,238
|
|
|
$
|
23,591
|
|
|
|
(27)
|
%
|
|
$
|
59,666
|
|
|
$
|
53,962
|
|
|
|
11
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Compensation *
|
|
$
|
1,610
|
|
|
$
|
4,222
|
|
|
|
(62)
|
%
|
|
$
|
11,478
|
|
|
$
|
4,971
|
|
|
|
131
|
%
|
Business
Restructuring
|
|
$
|
459
|
|
|
$
|
1,715
|
|
|
|
(73)
|
%
|
|
$
|
1,642
|
|
|
$
|
2,346
|
|
|
|
(30)
|
%
|
Adjusted Corporate
Expense
|
|
$
|
15,169
|
|
|
$
|
17,654
|
|
|
|
(14)
|
%
|
|
$
|
46,546
|
|
|
$
|
46,645
|
|
|
|
(0)
|
%
|
|
* See Table III
for a discussion of deferred compensation plan
accounting.
|
- Corporate expenses, excluding deferred compensation and
business restructuring expenses, decreased $2.5 million, or 14% for the quarter. The
quarterly decrease was primarily attributable to the non-recurrence
of employee separation costs incurred in the prior year
quarter.
Income Taxes and Net Interest
The Company's effective
tax rate was 17.3% for the first nine months of 2019 versus 18.7%
for the first nine months of 2018. This year-over-year
decrease was primarily attributable to higher current year U.S.
research and development tax credits, partially offset by the
combined non-recurrence of 2018 favorable tax benefits and
unfavorable 2018 tax consequences of repatriating foreign
cash. Net interest expense is down 42% year-over-year
primarily due to interest earned on higher U.S. cash balances after
the cash repatriation completed in 2018.
Shareholder Return
The Company paid $5.6 million of
dividends to shareholders and repurchased $7.0 million of Company stock in the third
quarter of 2019. During the first nine months of 2019 the
Company paid $16.9 million of
dividends and repurchased $13.2
million of Company stock. The Company has 349,830
shares remaining under its Board of Directors' share repurchase
authorization. With the increased cash dividend in the fourth
quarter of 2019, the Company has increased its dividend on its
common stock for the 52nd consecutive year.
Selected Balance Sheet Information
The Company's net
debt level decreased $11.4 million
for the quarter while the net debt ratio dropped from a negative 5%
to a negative 7%. The decrease in net debt was primarily
attributable to a $10.7 million
increase in cash partially driven by lower working capital
requirements.
($ in
millions)
|
|
9/30/19
|
|
|
6/30/19
|
|
|
3/31/19
|
|
|
12/31/18
As Adjusted
|
|
Net Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
|
$
|
231.9
|
|
|
$
|
232.6
|
|
|
$
|
271.9
|
|
|
$
|
276.1
|
|
Cash
|
|
|
286.0
|
|
|
|
275.3
|
|
|
|
269.5
|
|
|
|
300.2
|
|
Net Debt
|
|
$
|
(54.1)
|
|
|
$
|
(42.7)
|
|
|
$
|
2.4
|
|
|
$
|
(24.1)
|
|
Equity *
|
|
|
854.2
|
|
|
|
857.7
|
|
|
|
831.4
|
|
|
|
807.4
|
|
Net Debt + Equity
*
|
|
$
|
800.1
|
|
|
$
|
815.0
|
|
|
$
|
833.8
|
|
|
$
|
783.3
|
|
Net Debt / (Net Debt
+ Equity)
|
|
|
-7
|
%
|
|
|
-5
|
%
|
|
|
0
|
%
|
|
|
-3
|
%
|
The major working capital components were:
($ in
millions)
|
|
9/30/19
|
|
|
6/30/19
|
|
|
3/31/19
|
|
|
12/31/18
As Adjusted
|
|
Net
Receivables
|
|
$
|
283.0
|
|
|
$
|
289.0
|
|
|
$
|
298.9
|
|
|
$
|
280.0
|
|
Inventories
*
|
|
|
203.3
|
|
|
|
216.3
|
|
|
|
215.0
|
|
|
|
231.5
|
|
Accounts
Payable
|
|
|
(175.8)
|
|
|
|
(184.7)
|
|
|
|
(175.6)
|
|
|
|
(206.0)
|
|
|
|
$
|
310.5
|
|
|
$
|
320.6
|
|
|
$
|
338.3
|
|
|
$
|
305.5
|
|
|
* The 2018 amounts
for the noted line items have been retrospectively changed from the
amounts originally reported as a result of the Company's first
quarter 2019 change in method of accounting for U.S. inventory
valuation from LIFO to FIFO.
|
Capital spending was $25.7 million
during the quarter and $70.8 million
during the first nine months of 2019. This compares to
$19.2 million and $62.9 million, respectively, in the prior
year. For the full year, capital expenditures are expected to
be in the range of $110 million to
$130 million.
Outlook
"Adjusted net income for the first nine
months of 2019 is up 2% from our record in 2018, despite the
Mexican equipment failure and the decrease in commodity surfactant
volumes. We believe our continued focus on end market
diversification, Tier 2 and Tier 3 customers, as well as our
cost-out activities should improve future Surfactant margins.
We remain optimistic the Polymer business will deliver full year
volume growth and incremental margin improvement versus 2018 given
our strong rigid polyol growth in the first nine months. We
believe full year Specialty Product results will improve versus
2018. Overall, despite the current year challenges, we have
an opportunity to deliver another year of adjusted net income
growth," said F. Quinn Stepan, Jr.,
Chairman, President and Chief Executive Officer.
Conference Call
Stepan Company will host a conference
call to discuss the third quarter results at 10:00 a.m. ET (9:00 a.m.
CT) on October 23, 2019. The
call can be accessed by phone and webcast. Telephone access
will be available by dialing +1 (800) 682-8539, and the webcast can
be accessed through the Investor Relations/Conference Calls
page at www.stepan.com. A webcast replay of the conference call
will be available at the same location shortly after the call.
Supporting Slides
Slides supporting this press release
will be made available at www.stepan.com through the Investor
Relations page at approximately the same time as this press
release is issued.
Corporate Profile
Stepan Company is a major
manufacturer of specialty and intermediate chemicals used in a
broad range of industries. Stepan is a leading merchant
producer of surfactants, which are the key ingredients in consumer
and industrial cleaning compounds and in agricultural and oilfield
solutions. The Company is also a leading supplier of
polyurethane polyols used in the expanding thermal insulation
market, and CASE (Coatings, Adhesives, Sealants, and Elastomers)
industries.
Headquartered in Northfield,
Illinois, Stepan utilizes a network of modern production
facilities located in North and South
America, Europe and
Asia.
The Company's common stock is traded on the New York Stock
Exchange (NYSE) under the symbol SCL. For more information
about Stepan Company please visit the Company online at
www.stepan.com.
Contact: Luis E.
Rojo
|
(847)
446-7500
|
Tables follow
Certain information in this news release consists of
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. These statements
include statements about Stepan Company's 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, Stepan 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, you can identify forward-looking statements 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
Stepan 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 Stepan Company's
control, that could cause actual results to differ materially from
the forward-looking statements contained in this news release. Such
risks, uncertainties and other important factors include, among
other factors, the risks, uncertainties and factors described in
Stepan Company's Form 10-K, Form 10-Q and Form 8-K reports and
exhibits to those reports, and include (but are not limited to)
risks and uncertainties related to disruptions in production or
accidents at manufacturing facilities, global competition,
volatility of raw material and energy costs, disruptions in
transportation or significant changes in transportation costs,
reduced demand due to customer product reformulations or new
technologies, the probability of future acquisitions and the
uncertainties related to the integration of acquired businesses,
maintaining and protecting intellectual property rights,
international business risks, including currency exchange rate
fluctuations, legal restrictions and taxes, our debt covenants, our
ability to access capital markets, downturns in certain industries
and general economic downturns, global political, military,
security or other instability, costs related to expansion or other
capital projects, interruption or breaches of information
technology systems, the costs and other effects of governmental
regulation and legal and administrative proceedings and our ability
to retain executive management and key personnel.
These forward-looking statements are made only as of the date
hereof, and Stepan Company undertakes no obligation to update or
revise these forward-looking statements, whether as a result of new
information, future events or otherwise.
Table
I
|
|
STEPAN
COMPANY For the Three and Nine Months Ended September 30,
2019 and 2018 (Unaudited – in thousands, except
per share data)
|
|
|
|
|
Three Months Ended
September
30
|
|
|
Nine Months Ended
September
30
|
|
|
|
2019
|
|
|
2018
As Adjusted
|
|
|
2019
|
|
|
2018
As Adjusted
|
|
Net
Sales
|
|
$
|
451,582
|
|
|
$
|
507,997
|
|
|
$
|
1,413,755
|
|
|
$
|
1,527,198
|
|
Cost of Sales
*
|
|
|
374,180
|
|
|
|
424,421
|
|
|
|
1,158,785
|
|
|
|
1,262,443
|
|
Gross Profit
*
|
|
|
77,402
|
|
|
|
83,576
|
|
|
|
254,970
|
|
|
|
264,755
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
14,186
|
|
|
|
14,613
|
|
|
|
42,295
|
|
|
|
42,872
|
|
Administrative
|
|
|
19,708
|
|
|
|
21,904
|
|
|
|
60,558
|
|
|
|
59,441
|
|
Research, Development
and Technical Services
|
|
|
13,473
|
|
|
|
13,977
|
|
|
|
40,228
|
|
|
|
41,311
|
|
Deferred Compensation
(Income) Expense
|
|
|
1,610
|
|
|
|
4,222
|
|
|
|
11,478
|
|
|
|
4,971
|
|
|
|
|
48,977
|
|
|
|
54,716
|
|
|
|
154,559
|
|
|
|
148,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
Restructuring
|
|
|
459
|
|
|
|
1,715
|
|
|
|
1,642
|
|
|
|
2,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
*
|
|
|
27,966
|
|
|
|
27,145
|
|
|
|
98,769
|
|
|
|
113,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income
(Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest,
Net
|
|
|
(1,402)
|
|
|
|
(2,797)
|
|
|
|
(5,021)
|
|
|
|
(8,620)
|
|
Other, Net
*
|
|
|
885
|
|
|
|
346
|
|
|
|
4,265
|
|
|
|
1,990
|
|
|
|
|
(517)
|
|
|
|
(2,451)
|
|
|
|
(756)
|
|
|
|
(6,630)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes *
|
|
|
27,449
|
|
|
|
24,694
|
|
|
|
98,013
|
|
|
|
107,184
|
|
Provision for
Income Taxes *
|
|
|
1,569
|
|
|
|
2,940
|
|
|
|
16,945
|
|
|
|
20,033
|
|
Net Income
*
|
|
|
25,880
|
|
|
|
21,754
|
|
|
|
81,068
|
|
|
|
87,151
|
|
Net Income
(Income) Loss Attributable to Noncontrolling
Interests
|
|
|
9
|
|
|
|
-
|
|
|
|
23
|
|
|
|
9
|
|
Net Income
Attributable to Stepan Company *
|
|
$
|
25,889
|
|
|
$
|
21,754
|
|
|
$
|
81,091
|
|
|
$
|
87,160
|
|
Net Income Per
Common Share Attributable to Stepan Company *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic *
|
|
$
|
1.12
|
|
|
$
|
0.95
|
|
|
$
|
3.52
|
|
|
$
|
3.78
|
|
Diluted *
|
|
$
|
1.11
|
|
|
$
|
0.93
|
|
|
$
|
3.48
|
|
|
$
|
3.74
|
|
Shares Used to
Compute Net Income Per Common
Share Attributable
to Stepan Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,025
|
|
|
|
22,986
|
|
|
|
23,070
|
|
|
|
23,036
|
|
Diluted
|
|
|
23,300
|
|
|
|
23,288
|
|
|
|
23,320
|
|
|
|
23,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* The 2018 amounts
for the noted line items have been retrospectively changed from the
amounts originally reported as a result of the Company's first
quarter 2019 change in method of accounting for U.S. inventory
valuation from LIFO to FIFO.
|
Table
II
|
Reconciliation of
Non-GAAP Net Income and Earnings per Diluted Share *
|
|
|
|
Three Months Ended
September
30
|
|
|
Nine Months Ended
September
30
|
|
($ in
thousands, except per share amounts)
|
|
2019
|
|
|
EPS
|
|
|
2018
As
Adjusted
|
|
|
EPS
As
Adjusted
|
|
|
2019
|
|
|
EPS
|
|
|
2018
As
Adjusted
|
|
|
EPS
As
Adjusted
|
|
Net Income
Reported
|
|
$
|
25,889
|
|
|
$
|
1.11
|
|
|
$
|
21,754
|
|
|
$
|
0.93
|
|
|
$
|
81,091
|
|
|
$
|
3.48
|
|
|
$
|
87,160
|
|
|
$
|
3.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
(Income) Expense
|
|
$
|
1,392
|
|
|
$
|
0.06
|
|
|
$
|
2,610
|
|
|
$
|
0.11
|
|
|
$
|
6,482
|
|
|
$
|
0.28
|
|
|
$
|
2,633
|
|
|
$
|
0.11
|
|
Business
Restructuring
|
|
$
|
334
|
|
|
$
|
0.02
|
|
|
$
|
1,187
|
|
|
$
|
0.05
|
|
|
$
|
1,199
|
|
|
$
|
0.05
|
|
|
$
|
1,660
|
|
|
$
|
0.07
|
|
Cash-Settled
SARs
|
|
$
|
314
|
|
|
$
|
0.01
|
|
|
$
|
805
|
|
|
$
|
0.04
|
|
|
$
|
1,765
|
|
|
$
|
0.08
|
|
|
$
|
717
|
|
|
$
|
0.03
|
|
Environmental
Remediation
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,210
|
|
|
$
|
0.09
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Voluntary Debt
Prepayment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
948
|
|
|
$
|
0.04
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income
|
|
$
|
27,929
|
|
|
$
|
1.20
|
|
|
$
|
26,356
|
|
|
$
|
1.13
|
|
|
$
|
93,695
|
|
|
$
|
4.02
|
|
|
$
|
92,170
|
|
|
$
|
3.95
|
|
|
* All amounts in
this table are presented after-tax
|
The Company believes that certain measures that are not in
accordance with generally accepted accounting principles (GAAP),
when presented in conjunction with comparable GAAP measures, are
useful for evaluating the Company's operating performance and
provide better clarity on the impact of non-operational
items. 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, nor superior to, measures of financial performance
prepared in accordance with GAAP.
Reconciliation of
Pre-Tax to After-Tax Adjustments
|
|
|
|
Three Months Ended
September
30
|
|
|
Nine Months Ended
September
30
|
|
($ in
thousands, except per share amounts)
|
|
2019
|
|
|
EPS
|
|
|
2018
|
|
|
EPS
|
|
|
2019
|
|
|
EPS
|
|
|
2018
|
|
|
EPS
|
|
Pre-Tax
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
(Income) Expense
|
|
$
|
1,831
|
|
|
|
|
|
|
$
|
3,434
|
|
|
|
|
|
|
$
|
8,529
|
|
|
|
|
|
|
$
|
3,465
|
|
|
|
|
|
Business
Restructuring
|
|
$
|
459
|
|
|
|
|
|
|
$
|
1,715
|
|
|
|
|
|
|
$
|
1,642
|
|
|
|
|
|
|
$
|
2,346
|
|
|
|
|
|
Cash-Settled
SARs
|
|
$
|
413
|
|
|
|
|
|
|
$
|
1,059
|
|
|
|
|
|
|
$
|
2,322
|
|
|
|
|
|
|
$
|
943
|
|
|
|
|
|
Environmental
Remediation
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
2,908
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
Voluntary Debt
Prepayment
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
1,247
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Pre-Tax Adjustments
|
|
$
|
2,703
|
|
|
|
|
|
|
$
|
6,208
|
|
|
|
|
|
|
$
|
16,648
|
|
|
|
|
|
|
$
|
6,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Tax Effect
on Adjustments
|
|
$
|
(663)
|
|
|
|
|
|
|
$
|
(1,606)
|
|
|
|
|
|
|
$
|
(4,044)
|
|
|
|
|
|
|
$
|
(1,744)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-Tax
Adjustments
|
|
$
|
2,040
|
|
|
$
|
0.09
|
|
|
$
|
4,602
|
|
|
$
|
0.20
|
|
|
$
|
12,604
|
|
|
$
|
0.54
|
|
|
$
|
5,010
|
|
|
$
|
0.21
|
|
Table
III
|
|
Deferred
Compensation Plan
|
|
The full effect of
the deferred compensation plan on quarterly pretax income was $1.8
million of expense versus $3.4 million of expense in the prior
year. The year-to-date impact was $8.5 million of expense versus
$3.5 million of expense in the prior year. The accounting for
the deferred compensation plan results in operating income when the
price of 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 Company common stock are as
follows:
|
|
|
|
2019
|
|
|
2018
|
|
|
|
12/31
|
|
9/30
|
|
|
6/30
|
|
|
3/31
|
|
|
12/31
|
|
|
9/30
|
|
|
6/30
|
|
|
3/31
|
|
Stepan
Company
|
|
N/A
|
|
$
|
97.06
|
|
|
$
|
91.91
|
|
|
$
|
87.52
|
|
|
$
|
74.00
|
|
|
$
|
87.01
|
|
|
$
|
78.01
|
|
|
$
|
83.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The deferred
compensation income statement impact is summarized
below:
|
|
|
|
Three Months Ended
September
30
|
|
|
Nine
Months Ended
September
30
|
|
($ in
thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Deferred
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(Expense)
|
|
$
|
(1,610)
|
|
|
$
|
(4,222)
|
|
|
$
|
(11,478)
|
|
|
$
|
(4,971)
|
|
Other, net – Mutual
Fund Gain (Loss)
|
|
|
(221)
|
|
|
|
788
|
|
|
|
2,949
|
|
|
|
1,506
|
|
Total Pre
Tax
|
|
$
|
(1,831)
|
|
|
$
|
(3,434)
|
|
|
$
|
(8,529)
|
|
|
$
|
(3,465)
|
|
Total After
Tax
|
|
$
|
(1,392)
|
|
|
$
|
(2,610)
|
|
|
$
|
(6,482)
|
|
|
$
|
(2,633)
|
|
Table
IV
|
|
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 currency 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 table below 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, 2019 as compared to
2018:
|
|
($ in
millions)
|
|
Three Months Ended
September
30
|
|
|
Increase
(Decrease)
|
|
|
Decrease
Due to Foreign
Currency
Translation
|
|
|
Nine
Months Ended
September
30
|
|
|
(Decrease)
|
|
|
Decrease
Due to Foreign
Currency
Translation
|
|
|
|
2018
|
|
|
2018
As
Adjusted
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
As
Adjusted
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
451.6
|
|
|
$
|
508.0
|
|
|
$
|
(56.4)
|
|
|
$
|
(7.2)
|
|
|
$
|
1,413.8
|
|
|
$
|
1,527.2
|
|
|
$
|
(113.4)
|
|
|
$
|
(33.2)
|
|
Gross
Profit
|
|
|
77.4
|
|
|
|
83.6
|
|
|
|
(6.2)
|
|
|
|
(1.0)
|
|
|
|
255.0
|
|
|
|
264.8
|
|
|
|
(9.8)
|
|
|
|
(4.6)
|
|
Operating
Income
|
|
|
28.0
|
|
|
|
27.1
|
|
|
|
0.9
|
|
|
|
(0.5)
|
|
|
|
98.8
|
|
|
|
113.8
|
|
|
|
(15.0)
|
|
|
|
(2.5)
|
|
Pretax
Income
|
|
|
27.4
|
|
|
|
24.7
|
|
|
|
2.7
|
|
|
|
(0.5)
|
|
|
|
98.0
|
|
|
|
107.2
|
|
|
|
(9.2)
|
|
|
|
(2.4)
|
|
Table
V
|
|
Stepan
Company Consolidated Balance Sheets September
30, 2019 and December 31, 2018
|
|
|
Sept. 30,
2019
|
|
|
Dec. 31, 2018
As Adjusted
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
*
|
|
$
|
798,028
|
|
|
$
|
833,893
|
|
Property, Plant &
Equipment, Net
|
|
|
611,279
|
|
|
|
608,892
|
|
Other
Assets
|
|
|
109,063
|
|
|
|
71,829
|
|
Total Assets
*
|
|
$
|
1,518,370
|
|
|
$
|
1,514,614
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
$
|
292,963
|
|
|
$
|
338,582
|
|
Deferred Income Taxes
*
|
|
|
25,218
|
|
|
|
24,961
|
|
Long-term
Debt
|
|
|
207,783
|
|
|
|
239,022
|
|
Other Non-current
Liabilities
|
|
|
137,499
|
|
|
|
103,864
|
|
Total Stepan Company
Stockholders' Equity *
|
|
|
854,209
|
|
|
|
807,425
|
|
Noncontrolling
Interest
|
|
|
698
|
|
|
|
760
|
|
Total Liabilities and
Stockholders' Equity *
|
|
$
|
1,518,370
|
|
|
$
|
1,514,614
|
|
|
* The 2018 amounts
for the noted line items have been retrospectively changed from the
amounts originally reported as a result of the Company's first
quarter 2019 change in method of accounting for U.S. inventory
valuation from LIFO to FIFO.
|
View original
content:http://www.prnewswire.com/news-releases/stepan-reports-third-quarter-results-and-nine-month-earnings-300943562.html
SOURCE Stepan Company