NORTHFIELD, Ill., April 21 /PRNewswire-FirstCall/ -- Stepan Company
(NYSE: SCL) today reported record first quarter results for the
period ended March 31, 2009. SUMMARY ($in thousands) Three Months
Ended March 31 2009 2008 % Change ---- ---- -------- Net Sales
$318,143 $381,451 - 17 Net Income 15,153 8,747 + 73 Net Income
Excluding Deferred Compensation * 11,953 9,947 + 20 Earnings per
Diluted Share $1.43 $0.85 + 68 Earnings per Diluted Share Excluding
Deferred Compensation * $1.13 $0.97 + 16 * See Table II for a
discussion of deferred compensation plan accounting. FIRST QUARTER
RESULTS Net income for the quarter was $15.2 million, or $1.43 per
diluted share, compared to $8.7 million, or $0.85 per diluted
share, for the prior year quarter. Net income excluding deferred
compensation was $12.0 million versus $9.9 million last year.
Operating results benefitted from declining commodity prices and
expense control throughout the Company. Gross profit grew by $2.8
million (six percent), although sales volume declined by 13
percent. -- Surfactant gross profit rose $6.9 million, or 21
percent, on a nine percent decrease in volume. Declining raw
material costs led to recovery of previously lost margin,
particularly in Europe and Latin America. -- Polymer gross profit
declined $3.9 million, or 37 percent, on a 32 percent decline in
volume. The majority of the gross profit decline was attributable
to lower volumes and margins on sales of phthalic anhydride (PA),
which is used as a plasticizer in the depressed automotive,
housing, boating and recreational vehicle markets. BALANCE SHEET
The Company's relatively low debt level of $132.1 million declined
$10.9 million during the quarter and $24.8 million from the year
ago quarter end, driven by lower levels of working capital. --
Total debt to total capitalization ratio declined to 37.9 percent
versus 40.7 percent at last year end and 41.7 percent at March 31,
2008. Further working capital reductions are forecast for the
balance of the year. OPERATING EXPENSES Operating expenses declined
by $6.5 million, or 22 percent, due to the $6.2 million decline in
deferred compensation expense. ($in thousands) Three Months Ending
March 31 2009 2008 % Change ---- ---- -------- Marketing $9,313
$9,780 - 5 Administrative - General 9,987 10,110 - 1 Administrative
- Deferred Compensation (5,520) 674 NM Research, development and
technical service 8,746 8,416 + 4 ----- ----- Total $22,526 $28,980
- 22 ======= ======= SEGMENT RESULTS ($in thousands) Three Months
Ended March 31 2009 2008 % Change ---- ---- -------- Net Sales
Surfactants $259,634 $290,324 - 11 Polymers 48,713 80,836 - 40
Specialty Products 9,796 10,291 - 5 ----- ------ Total Net Sales
$318,143 $381,451 - 17 ======== ======== Net sales decreased 17
percent due to lower sales volume (13 percent) and lower foreign
sales due to currency translation effect (seven percent), partially
offset by higher selling prices (three percent). Surfactant gross
profit rose $6.9 million (21 percent), although volume decreased
nine percent. Lower sales of biodiesel and functional surfactants,
which are used in the housing market, accounted for a majority of
the volume decline. Sales volume in the larger consumer products
markets declined by less than three percent. The surfactant profit
improvement was due to falling raw material costs that allowed for
recovery of margin lost to escalating raw material costs over the
last several years. Europe and Latin America showed significant
recovery from previously depressed margins. As economic recovery
begins, we anticipate improved volume from consumer demand and
customer inventory replenishment. The polymer segment experienced a
$3.9 million (37 percent) decline in gross profit. Volume declined
32 percent. Phthalic anhydride volume declined 32 percent and
represented a majority of the segment's profit decline due to the
weakness in the automotive and housing markets. Sales of polyol
used primarily in rigid foam roofing insulation also declined, but
lower raw material costs helped minimize the decline in
profitability. OTHER INCOME AND EXPENSE The loss from equity
investments in joint ventures rose by $0.5 million due to the
addition of operating expenses for the TIORCO, LLC joint venture
which began last year to develop the market enhanced oil recovery
surfactants. Interest expense declined $0.5 million (22 percent)
due to lower interest rates and declining average debt levels.
Working capital levels are down due to lower raw material costs and
sales volume. The effective tax rate rose to 34.8 percent from 31.7
percent a year ago. Higher foreign tax provision and lower U.S. tax
credits resulting from lower biodiesel production led to the
increase. OUTLOOK "The relative stability of demand for surfactants
within the laundry and personal care markets, falling commodity
prices combined with expense control enabled Stepan to achieve
record first quarter results," said F. Quinn Stepan, Jr., President
and Chief Executive Officer. We anticipate the recession will
continue to negatively impact demand for polymers and functional
surfactants for the balance of 2009. However, seasonal demand
should improve polymer performance in the second and third
quarters. We will continue to strengthen our balance sheet and
position the Company for growth. CONFERENCE CALL Stepan Company
will host a conference call to discuss the first quarter results at
2:00 p.m. Eastern Daylight Time on April 22, 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. Tables follow 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, including the
expenditures necessary to address and resolve environmental claims
and 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 Months Ended March 31, 2009 and 2008
(Unaudited - 000's Omitted) Three Months Ended March 31 2009 2008 %
Change ---- ---- -------- Net Sales $318,143 $381,451 - 17 Cost of
Sales 269,448 335,593 - 20 ------- ------- Gross Profit 48,695
45,858 + 6 Operating Expenses: Marketing 9,313 9,780 - 5
Administrative 4,467 10,784 - 59 Research, development and
technical services 8,746 8,416 + 4 ----- ----- 22,526 28,980 - 22
Operating Income 26,169 16,878 + 55 Other Income (Expense):
Interest, net (1,842) (2,347) - 22 Loss from equity in joint
ventures (807) (277) + 191 Other, net (269) (1,457) - 82 -----
------- (2,918) (4,081) - 28 Income Before Provision for Income
Taxes 23,251 12,797 + 82 Provision for Income Taxes 8,093 4,067 +
99 ----- ----- Net Income $15,158 $8,730 + 74 Less: Net (Income)
Loss Attributable to the Noncontrolling Interest (5) 17 - --- --
Net Income Attributable to Stepan Company $15,153 $8,747 + 73
======= ====== Net Income Per Common Share Attributable to Stepan
Company Basic $1.53 $0.91 + 68 ===== ===== Diluted $1.43 $0.85 + 68
===== ===== Shares Used to Compute Net Income Per Common Share
Attributable to Stepan Company Basic 9,776 9,398 + 4 ===== =====
Diluted 10,569 10,233 + 3 ====== ====== Table II Deferred
Compensation Plan The full effect of the deferred compensation plan
on pretax income was $5.2 million of income versus expense of $1.9
million last year. The accounting for the deferred compensation
plan results in income when the price of Stepan Company common
stock or mutual funds held in the plan fall and expense when they
rise. The Company also recognizes the change in value of mutual
funds as investment income or loss. The deferred compensation
expense income statement impact is summarized below: ($in
thousands) Three Months Ended March 31 2009 2008 ---- ---- Deferred
Compensation Administrative Expense (Income) $(5,520) $674 Other,
net - Mutual Fund Loss 357 1,227 --- ----- Total Pretax (5,163)
1,901 ======= ===== Total After Tax $(3,200) $1,200 ======== ======
Reconciliation of non-GAAP net income: ($in thousands) Three Months
Ended March 31 2009 2008 ---- ---- Net income excluding deferred
compensation $11,953 $9,947 Deferred compensation plan (expense)
income 3,200 (1,200) ----- ------- Net income as reported $15,153
$8,747 ======= ====== Reconciliation of non-GAAP EPS: Three Months
Ended March 31 2009 2008 ---- ---- Earnings per diluted share
excluding deferred compensation $1.13 $0.97 Deferred compensation
plan (expense) income 0.30 (0.12) ---- ------ Earnings per diluted
share $1.43 $0.85 ===== ===== 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, not a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP. CONTACT:
JAMES E. HURLBUTT (847) 446-7500 DATASOURCE: Stepan Company
CONTACT: James E. Hurlbutt, +1-847-446-7500 Web Site:
http://www.stepan.com/
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